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Question regarding the net present value

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A company is considering spending $15,000 at Time 0 to test a new product. Depending on the test results, the firm may decide to spend $58,000 at Time 1 to start production of the product. If the product is introduced and it is successful, it will produce after tax cash flows of$45,000 a year for Years 2 through 4. The probability of successful test and investment is 62 percent. How do you calculate and what is the net present value at Time 0 given a 14 percent discount rate?

Reference no: EM131055665

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