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What is the net present value or npv of the investment

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Reference no: EM132822314

Upfront costs to develop and market the product are $3million. The product is expected to generate profits of $1.25million per year for 7 years. The company will also have to provide product support expected to cost $60,000 per year in perpetuity starting in 1 Year. Assume all profits and expenses occur at the end of the year.

Problem 1: What is the net present value (NPV) of this investment if the cost of capital is 7%? Should the firm undertake the project? Also, Can the IRR rule be used to evaluate this investment? why or why not?

Reference no: EM132822314

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