Suppose Apple is considering expanding its product line to include the new electric car, iCar. The decision to expand will require $20,000,000,000 to build new plants, sales centers, and a nationwide sales team. The company estimates it will generate $300,000,000 in sales in the first 5 years, followed by sales of $1,500,000,000 for the next 7 years, and $2,000,000,000 for 13 years after that. However, during each year operating costs will be 30% of sales. In addition, every 10 years the firm will need to spend $65,000,000 to update its facilities. If the firm’s required rate of return is 16.50%, Compute the NPV of the project? Show your work. Round to the nearest $0.01
Suppose Apple is considering expanding its product line to include the new electric car, iCar. The decision to expand will require $20,000,000,000 to build new plants, sales centers, and a nationwide sales team. The company estimates it will generate $300,000,000 in sales in the first 5 years, followed by sales of $1,500,000,000 for the next 7 years, and $2,000,000,000 for 13 years after that. However, during each year operating costs will be 30% of sales. In addition, every 10 years the firm will need to spend $65,000,000 to update its facilities. If the firm’s required rate of return is 16.50%, Compute the NPV of the project? Show your work. Round to the nearest $0.01
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
Suppose Apple is considering expanding its product line to include the new electric
car, iCar. The decision to expand will require $20,000,000,000 to build new plants, sales centers,
and a nationwide sales team. The company estimates it will generate $300,000,000 in sales in the
first 5 years, followed by sales of $1,500,000,000 for the next 7 years, and $2,000,000,000 for 13
years after that. However, during each year operating costs will be 30% of sales. In addition, every
10 years the firm will need to spend $65,000,000 to update its facilities. If the firm’s required rate
of return is 16.50%, Compute the NPV of the project? Show your work. Round to the nearest
$0.01
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