Calculate the net present value (NPV) before tax of investment A: a factory. Base your calculation on the following information:The investment cost is paid in full in quarter 0, and the cost of the factory is 100000.The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0Only Basic jetpacks should be manufactured at the factory throughout its lifetime.There is no investment in research to streamline production or material consumption.Suppose the quarterly demand in the market is constant and given at P = 228 - 0.007 * Q, where P is price and Q is the number of jetpacks in demand.There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 193 each.You produce as much as you sell.The costs associated with the quarterly production at the factory are given at K = 158 * Q + 20000, where 158 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.

1) Initial Cash outflow : Investment at Quarter 0 is 100,000, So, Quater 0, Cash outflow is 100,000.…

Answered: Calculate the net present value (NPV)…

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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Calculate the net present value (NPV) before tax of investment A: a factory. Base your calculation on the following information:

The investment cost is paid in full in quarter 0, and the cost of the factory is 100000.
The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0
Only Basic jetpacks should be manufactured at the factory throughout its lifetime.
There is no investment in research to streamline production or material consumption.
Suppose the quarterly demand in the market is constant and given at P = 228 - 0.007 * Q, where P is price and Q is the number of jetpacks in demand.
There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 193 each.
You produce as much as you sell.
The costs associated with the quarterly production at the factory are given at K = 158 * Q + 20000, where 158 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.
The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.