Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 4

Five years ago, a company made a $500,000 investment in a new high-temperature material. The product did poorly after only 1 year on the market. However, with a new name and advertising campaign 4 years later it did much better. New development funds have been expended this year (year 5) at a cost of $1.5 million. Determine the external rate of return using the ROIC approach and an investment rate of 15% per year. The i * rate is 44.1% per year.