Fintech Blockchain Inc. was founded in 2017 to develop blockchain technology for the banking industry. 2. They
Question:
Fintech Blockchain Inc. was founded in 2017 to develop blockchain technology for the banking industry.
2. They have an opportunity to create a new cryptocurrency to compete against Bitcoin.
3. They are considering investing in a new computer server for the cost of $2.5 million
4. Technology changes frequently these days, thus realizing they have four years to compete with Bitcoin. At the end of year four LaSalle Street Traders Inc. and Tokens R US, LLC will be entering the market with their cryptocurrencies forcing Blockchain Inc. to stop offering their cryptocurrency.
5. The server can be depreciated over 10 years by the straight-line method.
6. At the end of the four years Blockchain Inc. assumes the server will be worth $1.35 million and they will sell the server.
7. Their cost of capital is 12%, which is higher than their normal borrowing cost of 7%
8. Operating revenue for this project =$1 million per year
9. Operating expenses for this project $400,000 per year
10. Tax rate = 23%
What is the NPV of this project?
Show the calculations in a table format
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young