Q6. You are an analyst in the CFO's office of TrueMeds Co Ltd, a pharmaceutical company....

 

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Q6. You are an analyst in the CFO's office of TrueMeds Co Ltd, a pharmaceutical company. Your company is evaluating whether to launch a new medical formulation in the market. The CFO has asked you to evaluate this project's financial viability. You have had meetings with the engineering, marketing; sales, and production teams of your co on all these meetings, you have arrived at the following data: The initial investment in the project is expected to be Rs 20 lakhs and its useful economic life is 5 years. The project is expected to generate sales of Rs 12lakhs in year 1, and sales shall increase at 10% each year till year 5. Operating expenses is expected to be 30% of sales. The company's tax rate is 30% and cost of capital is 14%. Calculate NPV for the new project. Based on the above information, would you recommend to go ahead with the project? of 3/5 1 C JA Q6. You are an analyst in the CFO's office of TrueMeds Co Ltd, a pharmaceutical company. Your company is evaluating whether to launch a new medical formulation in the market. The CFO has asked you to evaluate this project's financial viability. You have had meetings with the engineering, marketing; sales, and production teams of your co on all these meetings, you have arrived at the following data: The initial investment in the project is expected to be Rs 20 lakhs and its useful economic life is 5 years. The project is expected to generate sales of Rs 12lakhs in year 1, and sales shall increase at 10% each year till year 5. Operating expenses is expected to be 30% of sales. The company's tax rate is 30% and cost of capital is 14%. Calculate NPV for the new project. Based on the above information, would you recommend to go ahead with the project? of 3/5 1 C JA

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the project we need to determine the cash flows for each year and discount them to their present value using the cost of capital The NPV is the sum of the pre... View the full answer