Should starpucks go ahead with project

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Reference no: EM13194962

You are hired as a consultant by StarPucks. The company would like to experiment locally with a new marketing strategy for a period of 2 years, to gauge how customers will react. There is an initial investment of $300,000. Annual advertising cost for this project will be $40,000, payable at the end of each year. The company expects the project to earn nothing the first year but it expects to earn $300,000 at the end of the second year of the project. At the end of the marketing project, StarPucks will be also able to recoup $120,000 from selling assets it acquired as part of the initial investment. The hurdle rate is 9%. Should StarPucks go ahead with this project?

Reference no: EM13194962

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