Pinder Co$.,$ Ltd$.$ is considering investing $$500,000$ to build a factory to produce electric bicycles. Pinder Co$.,$ Ltd$.$ has signed a contract with a large retailer that guarantees that Pinder Co$.,$ Ltd$.$ will get $$50$ for every bicycle sold, in addition to all production$-$related costs. This means that the annual cash flow generated by the production of bicycles will be $$50$ multiplied by the number of bicycles sold. In exchange for this guarantee, the retailer will take over the factory at a price of $$200,000$ in five years. Pinder Co$.,$ Ltd$.$ is expected to sell $7,000$ bicycles every year in the next five years. Assume that the discount rate of Pinder Co$.,$ Ltd$.$ is $10\%.$

How much do the sales of bicycles need to be reduced before this project reduces the wealth of the shareholders of Pinder Co$.,$ Ltd$.?$ 

Answer rating: 100% (QA)

Okay lets solve this stepbystep Investment cost 500000 Revenue per bicycle 50 Expected annual ... View the full answer