A company is considering a new product line that will involve cash investments of Tk. 520,000...

Transcribed Image Text:

A company is considering a new product line that will involve cash investments of Tk. 520,000 at time zero, Tk. 510,000 in year one, and Tk. 500,000 in year two. After- tax cash inflows of Tk. 460,000 are expected in year two, Tk. 540,000 in year three, and then Tk. 580,000 each year from year four to year ten. a. Calculate net present value if required rate of return is (10+ last digit of your ID)%. b. Calculate profitability index using the result of the net present value. c. Decide whether the company will consider the new product line or not. A company is considering a new product line that will involve cash investments of Tk. 520,000 at time zero, Tk. 510,000 in year one, and Tk. 500,000 in year two. After- tax cash inflows of Tk. 460,000 are expected in year two, Tk. 540,000 in year three, and then Tk. 580,000 each year from year four to year ten. a. Calculate net present value if required rate of return is (10+ last digit of your ID)%. b. Calculate profitability index using the result of the net present value. c. Decide whether the company will consider the new product line or not.

Answer rating: 100% (QA)

a To calculate the net present value NPV of the project we need to discount the cash inflows and out... View the full answer