A company is contemplating an investment in a new project. The company has already spent $80$k on a marketing study to evaluate this project. According to the study, the new online division will yield an increase in sales of $57$k for fiscal $2025$ and sales will grow by $5\%$ annually for the next $2$ years. The project is projected to be viable only for the three years. The cost will be $100$k upfront. Then, $7$k annually. Assume a tax rate of $20\%$ for the company and a discount rate of $10\%.$ Calculate the present value and explain why they should or should not pursue the project.

Answer rating: 100% (QA)

To calculate the present value of the project we need to consider the cash flows over the three year... View the full answer