The development of a new product will require the expenditure of $125,000 at the beginning of each of the next two years. When the product reaches the market in Year 3, it is expected to increase the firm's annual profit by $50,000 for eight years. (Assume that the profit is received at the end of each year.) Then $75,000 of the original expenditures should be recoverable. If the firm's cost of capital is 12%, should it proceed with the project?

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The Answer of The development of a new product will require the expenditure of $125,000 at the beginning of each of the next two years. When the product reaches the market in Year 3, it is expected to increase the firm's annual profit by $50,000 for eight years. (Assume that the profit is received at the end of each year.) Then $75,000 of the original expenditures should be recoverable. If the firm's cost of capital is 12%, should it proceed with the project?

The Development of a New Product Will Require the Expenditure