The development of a new product will require the expenditure of $150,000 at the beginning of each of the next three years. When the product reaches the market at the beginning of Year 4, it is expected to increase the firm's annual year-end profit by $90,000 for seven years. Then the product line will be terminated, and $100,000 of the original expenditures should be recoverable promptly. If the firm's cost of capital is 14%, should it proceed with the project?

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The Answer of The development of a new product will require the expenditure of $150,000 at the beginning of each of the next three years. When the product reaches the market at the beginning of Year 4, it is expected to increase the firm's annual year-end profit by $90,000 for seven years. Then the product line will be terminated, and $100,000 of the original expenditures should be recoverable promptly. If the firm's cost of capital is 14%, should it proceed with the project?

The Development of a New Product Will Require the Expenditure