SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP money and developed a system to remove metal contaminants from storm water in ship estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. up and retain four shipyards in the first year onwards, what is the present value (PV) of t investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations a SAP equal 50% of revenue. $5.64 million

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
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SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant
money and developed a system to remove metal contaminants from storm water in shipyards. The firm
estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. If SAP is able to sign
up and retain four shipyards in the first year onwards, what is the present value (PV) of the project (net of
investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations and other costs for
SAP equal 50% of revenue.
$5.64 million
$4.80 million
$4.51 million
$5.93 million
Transcribed Image Text:SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. If SAP is able to sign up and retain four shipyards in the first year onwards, what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations and other costs for SAP equal 50% of revenue. $5.64 million $4.80 million $4.51 million $5.93 million
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