Innovation Company is thinking about marketing a new software product. Upfront c
ID: 2686345 • Letter: I
Question
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5,200,000. The product is expected to generate profits of $1,000,000 per year for ten years. The company will have to provide product support expected to cost 93,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. If the cost of capital is 4.68%, the NPV of the investment is? (in dollar) (Round to the nearest dollar.) If the cost of capital is 2.67%, the NPV of the investment is? (in dollar) (Round to the nearest dollar.) If the cost of capital is 10.10%, the NPV of the investment is? (in dollar) (Round to the nearest dollar.)Explanation / Answer
We generally do not answer the questions of those who are having low rating. You are having a rating of "44%". Please rate all answers and improve your rating. Even if you find the answers are incorrect, rate them as not helpful. But do rate them for the good of both of us. Thanks!! Coming to the problem a)NPV = -5200000+(1000000/(1.0468^1))+(1000000/(1.0468^2))+(1000000/(1.0468^3))+(1000000/(1.0468^4))+(1000000/(1.0468^5))+(1000000/(1.0468^6))+(1000000/(1.0468^7))+(1000000/(1.0468^8))+(1000000/(1.0468^9))+(1000000/(1.0468^10))-((93000/(1.0468^1))+(93000/(1.0468^2))+(93000/(1.0468^3))+(93000/(1.0468^4))+(93000/(1.0468^5))+(93000/(1.0468^6))+(93000/(1.0468^7))+(93000/(1.0468^8))+(93000/(1.0468^9))+(93000/(1.0468^10))) = 1913739.32 b)NPV = -5200000+(1000000/(1.0267^1))+(1000000/(1.0267^2))+(1000000/(1.0267^3))+(1000000/(1.0267^4))+(1000000/(1.0267^5))+(1000000/(1.0267^6))+(1000000/(1.0267^7))+(1000000/(1.0267^8))+(1000000/(1.0267^9))+(1000000/(1.0267^10))-((93000/(1.0267^1))+(93000/(1.0267^2))+(93000/(1.0267^3))+(93000/(1.0267^4))+(93000/(1.0267^5))+(93000/(1.0267^6))+(93000/(1.0267^7))+(93000/(1.0267^8))+(93000/(1.0267^9))+(93000/(1.0267^10))) = 2668841.60 c)NPV = -5200000+(1000000/(1.101^1))+(1000000/(1.101^2))+(1000000/(1.101^3))+(1000000/(1.101^4))+(1000000/(1.101^5))+(1000000/(1.101^6))+(1000000/(1.101^7))+(1000000/(1.101^8))+(1000000/(1.101^9))+(1000000/(1.101^10))-((93000/(1.101^1))+(93000/(1.101^2))+(93000/(1.101^3))+(93000/(1.101^4))+(93000/(1.101^5))+(93000/(1.101^6))+(93000/(1.101^7))+(93000/(1.101^8))+(93000/(1.101^9))+(93000/(1.101^10))) = 349261.18