Use the Information for the Question(s)below

question 39

Multiple Choice

Use the information for the question(s) below.
Boulderado has come up with a new composite snowboard.Development will take Boulderado four years and cost $250,000 per year,with the first of the four equal investments payable today upon acceptance of the project.Once in production the snowboard is expected to produce annual cash flows of $200,000 each year for 10 years.Boulderado's discount rate is 10%.
-Calculate the IRR for the snowboard project and use it to determine the maximum deviation allowable in the cost of capital estimate that leaves the investment decision unchanged.The maximum deviation allowable is closest to:

• A)11.0%.
• B)0.0%.
• C)2.5%.
• D)1.0%.

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Definitions:

Product Assessment

The evaluation process of a product's performance, features, and market potential to determine its viability and success in the market.

Disruptive Innovation

An innovation that significantly alters the market landscape by introducing simplicity, convenience, accessibility, or affordability where complexity and high cost are the status quo.

Product Development Activities

A series of steps that include the conceptualization, design, development, and marketing of newly created or newly rebranded goods or services.