Find out the optimal time to undertake product expansion

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Problem:

HV Inc. is trying to determine the optimal time to undertake a product expansion. The project will require an initial investment of $15M and the firm has a WACC of 3%. Theexpansion is estimated to last 8 years, and if it is undertaken today, the annual cash flows associated with it will be $2.25M.  Due to anticipated product adoption throughout the industry, it is estimated that the annual cash inflows will increase by 2% annually. What is the optimal time to undertake the product expansion and what is its value to the firm?

Summary of question:

The question is from Finance and it is about company which wants to find out the optimal time to undertake product expansion. Assuming a positive position, the optimal time as well as the value accrued to the company need to be calculated.

Reference no: EM13828316

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