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A company is developing a new product. The development of the product requires an initial...

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Accounting

A company is developing a new product. The development of the product requires an initial investment of $160,000 with further investments of $90,000 in year 1, $60,000 in year 2 and $10,000 in year 3. The company will launch the product on the market in year 3 and the company expects annual profits of $60,000 from year 3 to year 7. At the end of year 7, the company expects to terminate the production line and sell it to a competitor for $80,000. The company's required rate of return is 7%.

a. Calculate the NPV for this product.

Round to the nearest cent

b. Should the company proceed with developing the product?

Yes

No

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