Question: Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that the company can

Applied Nanotech is thinking about introducing a new surface cleaning machine. The

Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that the company can sell 14 units per year at $302,000 net cash flow per unit for the next four years. The engineering department has come up with the estimate that developing the machine will take a $13.5 million initial investment. The finance department has estimated that a discount rate of 10 percent should be used. What is the base-case NPV? (A negative answer should be indicated by a minus a. sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) If unsuccessful, after the first year the project can be dismantled and will have an aftertax salvage value of $10.7 million. Also, after the first year, expected cash flows b. will be revised up to 19 units per year or to O units, with equal probability. What is the revised NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) a. Base-case NPV b. Revised NPV

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!