Sarah D is thinking of releasing her fourth full length CD. It will take an upfront S3000
Question:
Sarah D is thinking of releasing her fourth full length CD. It will take an upfront S3000 production expense to manufacture 1000 CDs. She will have advertising and marketing expenses of S5000 the first year, S4000 the second year, S3000 the third year, and $0 the last year. The CDs will sell for $16 each. Marketing research shows she will sell 400 CDs the first year, 300 the second year, 200 the third year and 100 the last year. Her opportunity cost of capital is 10%.
Requirements:
a. Build the Project evaluation table establishing cash inflows and out flows in their appropriate time horizon
b. Should she fund the project? Use net present value analysis.
c. Sarah D's opportunity cost of capital rises to 15%. Now should she fund the project?
Matching Supply with Demand An Introduction to Operations Management
ISBN: 978-0073525204
3rd edition
Authors: Gerard Cachon, Christian Terwiesch