SAP IncReceived a $2 Million Grant Under Its Small Business Innovation

question 4

Multiple Choice

SAP Inc.received a $2 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 $600,000 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 15% per year? Assume a cost of operations and other costs for SAP equal 40% of revenue.

• A)$6.3 million
• B)$6.7 million
• C)$7.6 million
• D)$7.9 million
• E)$8.3 million

---

Definitions:

Product Launch

The introduction of a new product to the market, involving activities designed to promote and sell the product.

Product Development

The process of creating or improving a product or service to meet market demands or take advantage of new opportunities.

Test Marketing

A strategy that involves launching a product in a limited market to gauge consumer response before a wider release.

Planned Obsolescence

A practice in which companies frequently come out with new models of a product that make existing models obsolete.