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What is the net present value of the production

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William's Co. is considering spending $15,000 at Time 0 to test a new product. Depending on the test results, the firm may decide to spend $58,000 at Time 1 to start production of the product. If the product is introduced and it is successful, it will produce after tax cash flows of $45,000 a year for Years 2 through 4. The probability of successful test and investment is 58 percent. The discount rate is 8%. What is the net present value of the production at Time 1 and what is the overall projects net present value at Time 0?

Reference no: EM132719431

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