The investment in a new product requires a capital expenditure of € 45,000.-. The economic life time is five years. The annual fixed operational payments are € 95,000.-. The proportional cash outs per unit amounts to € 200.-. The internal interest rate (= WACC) is 10% and the number of selling units are 300/year. What is the minimum sales price/unit (x), which ensures the required profitability of the investment? Use a) the NPV method b) the annuity method!

The investment in a new product requires a capital expenditure of € 45,000.-. The economic life time is five years. The annual fixed operational payments are € 95,000.-. The proportional cash outs per unit amounts to € 200.-. The internal interest rate (= WACC) is 10% and the number of selling units are 300/year. What is the minimum sales price/unit (x), which ensures the required profitability of the investment? Use a) the NPV method b) the annuity method!

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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