Now suppose you invest in both a factory and the research for the production of Green jetpacks. Look at the factory and research as a total investment. Calculate the net present value (NPV) before tax on the investment based on the following information:The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000.The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0Only green jetpacks should be produced at the factory throughout its lifetime.There is no investment in research to streamline production or material consumption.Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand.There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each.You produce as much as you sell.The costs associated with the quarterly production at the factory are given at K = 178 * Q + 20000, where 178 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.

Initial Investment = Investment in Factory + Investment in research = 100000 + 100000 = 200000 Life…

Answered: Now suppose you invest in both a…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter27: Investment, The Capital Market, And The Wealth Of Nations

Section: Chapter Questions

Problem 13CQ

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Now suppose you invest in both a factory and the research for the production of Green jetpacks. Look at the factory and research as a total investment. Calculate the net present value (NPV) before tax on the investment based on the following information:

The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000.
The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0
Only green jetpacks should be produced at the factory throughout its lifetime.
There is no investment in research to streamline production or material consumption.
Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand.
There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each.
You produce as much as you sell.
The costs associated with the quarterly production at the factory are given at K = 178 * Q + 20000, where 178 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.
The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.

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