The marketing department is proposing to launch a new product; the Whiz Bang Flambo – WBF for short. They have conducted market research and are estimating sales of 50,000 per year if the price is set at $15. The development department has studied the specifications and is estimating it will take two years to bring the product to market and will cost $400,000 in the first year and $700,000 in the second year. The operations department is estimating it will cost five dollars to produce each WBF.

Calculate the net present value using a time horizon of five years (two years for development and three years of sales) and a discount rate of 20%. Recalculate using a discount rate of 10%.

Answer rating: 100% (QA)

To calculate the net present value NPV of the project we need to calculate the present value of all ... View the full answer