What is annual net cash flow in phase

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Reference no: EM132149723

A company XYZ is considering manufacturing a product in space. The project lifetime is 10 years and has the following consecutive phases: Phase 1 (years 1 to 3): The engineering design and development requires 3 years. No production is done during this period Phase 2 (years 4 to 10): to launch the spacecraft into orbit, operate the equipment from the ground by remote control, and recover the spacecraft with the product. This phase is completed in one year, and will be repeated for the next 6 years for a total of 7 launches.

All costs are paid at the end of each year. The minimum attractive rate of return is i=25%

Phase 2 of the project has the following costs, all paid at the end of each year:

Launch $6000000

Insurance $500000

Labor $1550000

Material $860000

What is the annual net cash flow in phase 2 if the annual income as a result of sales in phase 2 is $16000000

Hint: Annual net cash flow is the difference between the annual income and annual costs.

Reference no: EM132149723

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