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%.
$$\begin{array} { | l | c | }
\hline \text { Years } & \text { Cash F1aws } \
\hline 1 & 80,000 \
\hline 2 & 95,000 \
\hline 3 & 95,000 \
\hline 4 & 110,000 \
\hline 5 & 110,000 \
\hline 6 & 110,000 \
\hline
\end{array}$$
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%.
$$\begin{array} { | l | c | } 
\hline \text { Years } & \text { Cash F1aws } \
\hline 1 & 80,000 \
\hline 2 & 95,000 \
\hline 3 & 95,000 \
\hline 4 & 110,000 \
\hline 5 & 110,000 \
\hline 6 & 110,000 \
\hline
\end{array}$$
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 whether Chipper Nipper Cookie Company should introduce a new product, we need to calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) of the investment. 
Using the given cashflows and the cost of capital of 11.5%, the NPV of this investment is calculated as:
NPV = -$180,000 + ($80,000/1.115) + ($95,000/1.115^2) + ($95,000/1.115^3) + ($110,000/1.115^4) + ($110,000/1.115^5) + ($110,000/1.115^6)
NPV = $228,940 (rounded to the nearest dollar)
Since the NPV is positive, the investment is expected to be profitable and should be pursued. 
Additionally, the IRR of the investment is found to be 46.62%, which is higher than the cost of capital of 11.5%. Therefore, Chipper Nipper Cookie Company should introduce the new product.

Based Upon the Following Cash Flows, Should Chipper Nipper Cookie