Question: Neptune Biometrics, despite its promising technology, is having difficulty generating profits. Having raised $ 8 5 million in an initial public offering of its stock
Neptune Biometrics, despite its promising technology, is having difficulty
generating profits. Having raised $ million in an initial public offering
of its stock early in the year, the company is poised to introduce a new
product, an inexpensive fingerprint door lock. If Neptune engages in a promotional
campaign costing $ million this year, its annual aftertax cash
flow over the next five years will be only $ million. If it does not undertake
the campaign, it expects its aftertax cash flow to be $ million
annually for the same period. Assuming the company has decided to stay
in its chosen business, is this campaign worthwhile when the discount rate
is percent? Why or why not?
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