Bicol Hardware Inc is considering two alternative strategies for a new power tool. According to Jun Ramos who is introducing the power tool, the new product will require an outlay of P30,000 with a low price strategy. The product will generate cash proceeds of P20,000 per year and will have a life to two years. With a high price strategy, the product will generate cash proceeds of P36,000 but will have a life of only one year. The cost of money for the company is 10%. Determine the net present value of the high price strategy.
Bicol Hardware Inc is considering two alternative strategies for a new power tool. According to Jun Ramos who is introducing the power tool, the new product will require an outlay of P30,000 with a low price strategy. The product will generate cash proceeds of P20,000 per year and will have a life to two years. With a high price strategy, the product will generate cash proceeds of P36,000 but will have a life of only one year. The cost of money for the company is 10%. Determine the net present value of the high price strategy.
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
Related questions
Question
Bicol Hardware Inc is considering two alternative strategies for a new power tool.
According to Jun Ramos who is introducing the power tool, the new product will require
an outlay of P30,000 with a low price strategy. The product will generate cash proceeds
of P20,000 per year and will have a life to two years. With a high price strategy, the
product will generate cash proceeds of P36,000 but will have a life of only one year. The
cost of money for the company is 10%. Determine the
strategy.
ANSWER: P32,727.27
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education