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What is the npv of investment

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Reference no: EM133072217

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5 million. The product is expected to generate profits of $1 million per year for 10 years. The company will have to provide product support expected to cost $100,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.

-What is the NPV of this investment if the cost of capital is 6%? Should the firm undertake the project? Repeat the analysis for discount rates of 2% and 12%.

-How many IRRs does this investment opportunity have?

-Can the IRR rule be used to evaluate this investment? Explain.

Reference no: EM133072217

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