SAP IncReceived a $1 Million Grant Under Its Small Business Innovation

question 86

Multiple Choice

SAP Inc.received a $1 million grant under its Small Business Innovation program.SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards.The firm estimates that each shipyard spends $500,000 a year on storm water clean-up efforts.If SAP is able to sign up and retain four shipyards from the first year onwards,what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 18% per year? Assume a cost of operations and other costs for SAP equal 50% of revenue.

• A)$4.56 million
• B)$4.98 million
• C)$5.32 million
• D)$5.87 million

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Definitions:

Prestige Pricing

Strategies that establish relatively high prices to develop and maintain an image of quality and exclusiveness.

Demonstrations

Public gatherings where individuals display their support or opposition towards a particular cause or policy.

Prospective Clients

Potential customers who have shown interest in a company's products or services but have not yet made a purchase.

Printer

A device that converts digital documents and images into physical copies by applying ink or toner onto paper.