What is the revised npv

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Question - Herjavec Enterprises is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that the company can sell 16 units per year at $295,000 net cash flow per unit for the next four years. The engineering department has come up with the estimate that developing the machine will take a $14.1 million initial investment. The finance department has estimated that a discount rate of 13 percent should be used.

a. What is the base-case NPV?

b. If unsuccessful, after the first year, the project can be dismantled and will have an after tax salvage value of $10 million. Also, after the first year expected cash flows will be revised up to 21 units per year or down to 0 units with equal probability. What is the revised NPV?

Reference no: EM132940464

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