Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000 and the cost of capital is 11.5%.
Years $ \quad$ Cash Flows
1 $ \quad$$ \quad$$ \quad$$80,000
2 $ \quad$$ \quad$$ \quad$ 95,000
3 $ \quad$$ \quad$$ \quad$ 95,000
4 $ \quad$$ \quad$$ \quad$110,000
5 $ \quad$$ \quad$$ \quad$110,000
6 $ \quad$$ \quad$$ \quad$110,000
A) Yes, the rounded npv is $228, 940 and the irr is 46.62%
B) Yes, the rounded npv is $75,428.63 and the irr is 12.27%
C) No, the rounded npv is -$57,277.32 and the irr is 8.75%
D) No, the rounded npv is -$221,275.39 and the irr is 9.97%

Question

Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000 and the cost of capital is 11.5%.
Years	$ \quad$ Cash Flows
1	$ \quad$$ \quad$$ \quad$$80,000
2	$ \quad$$ \quad$$ \quad$ 95,000
3	$ \quad$$ \quad$$ \quad$ 95,000
4	$ \quad$$ \quad$$ \quad$110,000
5	$ \quad$$ \quad$$ \quad$110,000
6	$ \quad$$ \quad$$ \quad$110,000
A) Yes, the rounded npv is $228, 940 and the irr is 46.62%
B) Yes, the rounded npv is $75,428.63 and the irr is 12.27%
C) No, the rounded npv is -$57,277.32 and the irr is 8.75%
D) No, the rounded npv is -$221,275.39 and the irr is 9.97%

Quizplus · Accepted Answer

To determine the feasibility of the new product, we need to calculate the net present value (NPV) and internal rate of return (IRR) of the project. Given the cash flows and cost of capital, we can calculate the NPV and IRR using Excel or a financial calculator.

Using Excel's NPV function, we get a rounded NPV of $228,940 at 11.5% cost of capital, which is positive. This indicates that the project is expected to generate a positive return after accounting for the cost of capital. Additionally, using Excel's IRR function, we get an IRR of 46.62%, which is higher than the cost of capital, indicating that the project is expected to generate a return higher than the required return.

Therefore, based on these calculations, we can say that the Chipper Nipper Cookie Company should introduce the new product, Rolling In Dough Pies.

Based Upon the Following Cash Flows, Should Chipper Nipper Cookie \quad

Based Upon the Following Cash Flows, Should Chipper Nipper Cookie $\quad$