You are the Financial Manager of C&C Corporation and are evaluating to launch a new product...

 

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You are the Financial Manager of C&C Corporation and are evaluating to launch a new product that requires an initial cash outlay of $220,000 to purchase a new machine. It is expected to generate net cash inflows of $110,000, $90,000 and $80,000 in year 1, 2 and 3 respectively. REQUIRED (a) If the discount rate is 7.5%, calculate the net present value (NPV) of the new product. (b) Should the company purchase a new machine to launch the new product? Briefly explain the decision aligning the primary goal of a Financial Manager. [within 50 words] You are the Financial Manager of C&C Corporation and are evaluating to launch a new product that requires an initial cash outlay of $220,000 to purchase a new machine. It is expected to generate net cash inflows of $110,000, $90,000 and $80,000 in year 1, 2 and 3 respectively. REQUIRED (a) If the discount rate is 7.5%, calculate the net present value (NPV) of the new product. (b) Should the company purchase a new machine to launch the new product? Briefly explain the decision aligning the primary goal of a Financial Manager. [within 50 words]

Answer rating: 100% (QA)

a To calculate the net present value NPV of the new product we need to discount the cash inflows by ... View the full answer