Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%. Years Cash Flows 1 $ 80,000 2 $ 95,000 3 $ 95,000 4 $110,000 5 $110,000 6 $110,000 a. Yes, the rounded NPV is $75,428.63 and the IRR is 12.27%. b. No, the rounded NPV is –$221,275.39 and the IRR is 9.97%. c. No, the rounded NPV is –$57,277.32 and the IRR is 8.75%. d. Yes, the rounded NPV is $228, 940.00 and the IRR is 46.62%
Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%. Years Cash Flows 1 $ 80,000 2 $ 95,000 3 $ 95,000 4 $110,000 5 $110,000 6 $110,000 a. Yes, the rounded NPV is $75,428.63 and the IRR is 12.27%. b. No, the rounded NPV is –$221,275.39 and the IRR is 9.97%. c. No, the rounded NPV is –$57,277.32 and the IRR is 8.75%. d. Yes, the rounded NPV is $228, 940.00 and the IRR is 46.62%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%.
|
Years |
Cash Flows |
|
1 |
$ 80,000 |
|
2 |
$ 95,000 |
|
3 |
$ 95,000 |
|
4 |
$110,000 |
|
5 |
$110,000 |
|
6 |
$110,000 |
| a. |
Yes, the rounded
|
|
| b. |
No, the rounded NPV is –$221,275.39 and the IRR is 9.97%.
|
|
| c. |
No, the rounded NPV is –$57,277.32 and the IRR is 8.75%.
|
|
| d. |
Yes, the rounded NPV is $228, 940.00 and the IRR is 46.62%.
|
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