A marketing company intends to distribute a new product. It is expected to produce net returns of $16,000 per year forthe first four years and $15,000 per year for the following three years. The facilities required to distribute the productwill cost $70,000 with a disposal value of $13,000 after seven years. The facilities will require a major facelift costing$11,000 each after three years and after five years. If the company requires a return on investment of 10%, should thecompany distribute the new product?The companydistribute the new product.

The net present value compares the present value of anticipated cash inflows and expenditures to…

Answered: $11,000 each after three years and…

$11,000 each after three years and after five years. If the company requires a return on investment of 10%, should the company distribute the new product?

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

A marketing company intends to distribute a new product. It is expected to produce net returns of $16,000 per year for
the first four years and $15,000 per year for the following three years. The facilities required to distribute the product
will cost $70,000 with a disposal value of $13,000 after seven years. The facilities will require a major facelift costing
$11,000 each after three years and after five years. If the company requires a return on investment of 10%, should the
company distribute the new product?
The company
distribute the new product.

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