Company XYZ has developed the concept of a new product, frompreliminary budgetary estimate to final design ready for implementation.The development has required an initial investment at the beginning ofthe activity, which lasted six months before implementation andbeginning of production.At completion of implementation and beginning of production the CEOwants to estimate the expected PV of the investment, he/she has thefollowing data:• Capital for developmentP1 = $30,000Development period0.5 yearsCapital for ImplementationP2 = $2,000,000%3DAnticipated sales revenues$20,000Ar = $250,000/yrplus Gr =Anticipated 0&M cost$2,000A om= $25,000/yrplus G om =Project Life15 yearsSalvage ValueF = 20% of invested capital%3D• Worth of Capital availability for the Companyi= 7.35%QUESTIONS:1) Draw the Cash Flow Diagram of this investment.2) Write the expression for deriving PV using generic i and n. Assume thebeginning of production as the reference period.

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Company XYZ has developed the concept of a new product, from preliminary budgetary estimate to final design ready for implementation. The development has required an initial investment at the beginning of the activity, which lasted six months before implementation and beginning of production. At completion of implementation and beginning of production the CEO wants to estimate the expected PV of the investment, he/she has the following data:

Company XYZ has developed the concept of a new product, from preliminary budgetary estimate to final design ready for implementation. The development has required an initial investment at the beginning of the activity, which lasted six months before implementation and beginning of production. At completion of implementation and beginning of production the CEO wants to estimate the expected PV of the investment, he/she has the following data:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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