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:

Gymnosperms

A group of seed-producing plants that includes conifers, cycads, Ginkgo, and gnetophytes, characterized by seeds that are not enclosed in an ovary.

Gnetophyta

A division of gymnosperms, with characteristics that share some similarities to angiosperms, including the genera Ephedra, Gnetum, and Welwitschia.

Gametophyte

The sexual phase in the life cycle of plants and algae that produces gametes, typically haploid.

Integuments

Protective layers of tissue that cover the body or parts of plants or seeds, serving as a barrier against environmental stresses.