A sports nutrition company is examining

Reference no: EM13265698

A sports nutrition company is examining whether a new high-performance sports drink should be added to its product line. A preliminary feasibility analysis indicated that the company would need to invest $17.5 million in a new manufacturing facility to produce and package the product. A financial analysis using sales and cost data supplied by marketing and production personnel indicated that the net cash flow (cash inflows-cash outflows) would be $6.1 million in the first year of commercialization, $7.4 million in year 2, $7.0 million in year 3, and $5.5 million in year 4.

Senior company executives were undecided whether to move forward with the development of the new product. They requested that a discounted cash flow analysis be performed using two different discount rates; 20 percent and 15 percent.

Should the company proceed with development of the product if the discount rate is 20 percent? Why?

Does the decision to proceed with development of the product change if the discount rate is 15 percent? Why?

Reference no: EM13265698

Questions Cloud

Explain how many milliliters of active ingredient : A solution of cough syrup contains 5.00\% active ingredient by volume. If the total volume of the bottle is 34.0mL , how many milliliters of active ingredient are in the bottle? Express your answer with the appropriate units.

What volume of patients per month : If the center needs to make a profit of $75,000 per month, what is the new volume per month?

Find the maximum current through the resistor : When a 700? resistor is connected across an AC power supply, the resistor dissipates energy at a rate of 15.0W. Find the maximum current through the resistor

What was the cash flow to stockholders for the calendar year : On March 31, the firm sold an additional 670 shares at a price per share of $34.5. On June 30, the firm issued an annual dividend of $2.80 per share. What was the cash flow to stockholders for the calendar year?

A sports nutrition company is examining : A sports nutrition company is examining whether a new high-performance sports drink should be added to its product line. A preliminary feasibility analysis indicated that the company would need to invest $17.5 million in a new manufacturing facility ..

Explain how many centimeters does light travel : How many centimeters does light travel in 5.00 years (given that the velocity of light is 3.00 \times 10^{10} {\rm cm}/{\rm s})? Express your answer with the appropriate units.

What is the common-base year value : Templeton Stores had annual sales of $366,800 last year and $448,700 this year. What is the common-base year value for this year's sales if the base year's sales amount is $282,900?

Find the average force the ball exerts on the hand & glove : A catcher catches a fastball going 95mi/hr and recoils 12cm while stopping the ball in 0.005s. FIND the average force the ball exerts on the hand & glove

The annual planning process at century office systems : The annual planning process at Century Office Systems, Inc. had been arduous but produced a number of important marketing initiatives for the next year. Most notably, company executives had decided to restructure its product-marketing team into two s..

User Account

All Pages