Webster's Wants to Introduce a New Product That Has a Start-Up

question 75

Multiple Choice

Webster's wants to introduce a new product that has a start-up cost of $7,800.The product has a 2-year life and will provide cash flows of $6,700 in Year 1 and $4,300 in Year 2.The required rate of return is 14 percent.Should the product be introduced? Why or why not?

• A)Yes;the NPV is $1,108.15.
• B)Yes;the IRR is 12.97 percent.
• C)Yes;the IRR is 28.72 percent.
• D)Yes;the NPV is $1,409.27.
• E)No;the IRR is 12.94 percent.

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Definitions:

Supply Chain

A network between a company and its suppliers to produce and distribute a specific product to the final buyer.

Produced

The result of manufacturing or creating goods and services through the combination of various resources.

Consumed

Utilized or used up completely, typically referring to resources, products, or services that have been utilized by end-users.

Mode of Transportation

The method or means by which people, materials, and goods are moved from one place to another, such as by land, air, sea, or rail.