What is the payback period for the new widget

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This year you will spend $1 million developing a new widget. Demand for this new widget starting next year is expected to be 100,000 units. In years 3 through 5 demand is expected to increase 50,000 units each year. In years 6 through 10 demand is then expected to decrease 50,000 units per year. The margin earned on the widget is expected to be $5 throughout this time span. (limit: 1 total page)

Problem a) What is the breakeven quantity for the new widget?

Problem b) What is the payback period for the new widget?

Problem c) If the cost of capital to the firm is 10% yearly, what is the NPV of developing and then selling the new widget?

Reference no: EM132995747

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