oduction facilities for 225,000 BGs per year will require a $24.4 million immediate capital expenditure. Production costs stimated at $80 per BG. The BG marketing manager is confident that all 225,000 units can be sold for $115 per unit (in rea til the patent runs out five years hence. After that, the marketing manager hasn't a clue about what the selling price will b e real cost of capital is 13%. To keep things simple, also make the following assumptions: The technology for making BGs will not change. Capital and production costs will stay the same in real terms. Competitors know the technology and can enter as soon as the patent expires, that is, they can construct new plants in y start selling BGs in year 6. If your company invests immediately, full production begins after 12 months, that is, in year 1. (Assume it takes all firms on achieve full production.) There are no taxes. BG production facilities last 12 years. They have no salvage value at the end of their useful life. hat is the NPV of the BG project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 aces.)

oduction facilities for 225,000 BGs per year will require a $24.4 million immediate capital expenditure. Production costs stimated at $80 per BG. The BG marketing manager is confident that all 225,000 units can be sold for $115 per unit (in rea til the patent runs out five years hence. After that, the marketing manager hasn't a clue about what the selling price will b e real cost of capital is 13%. To keep things simple, also make the following assumptions: The technology for making BGs will not change. Capital and production costs will stay the same in real terms. Competitors know the technology and can enter as soon as the patent expires, that is, they can construct new plants in y start selling BGs in year 6. If your company invests immediately, full production begins after 12 months, that is, in year 1. (Assume it takes all firms on achieve full production.) There are no taxes. BG production facilities last 12 years. They have no salvage value at the end of their useful life. hat is the NPV of the BG project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 aces.)

Name: Thanks to acquisition of a key patent, your company now has exclusive
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Description: Thanks to acquisition of a key patent, your company now has exclusive production rights for barkelgassers (BGs) in North America.Production facilities for 225,000 BGs per year will require a $24.4 million immediate capital expenditure. Production co

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...

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