Car company sells 20,000 sedans a year which each net $20,000. It is now considering a new 4WD project that would last for 2 years. The company expects to sell 10,000 4WDs at $30,000 each. 

The 4WD project is expected to cost $500 million to set up. It is expected that 20% of 4WD customers will shift from buying a sedan to buying the new 4WD.

The firm's discount rate is 10% p.a. Should they introduce the new 4WD or not?

Answer rating: 100% (QA)

determine whether the company should introduce the new 4WD we need to calculate the projects net pre... View the full answer