Case Study: Lambda Lambda is a company engaged in the development of eco-frie...
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Case Study: Lambda
Lambda is a company engaged in the development of eco-friendly home appliances.
Its product development division has recently introduced
EcoChill, an
energy-efficient compact refrigerator targeted at environmentally conscious
urban households. Industry forecasts suggest that EcoChill will have a market
presence lasting approximately three years due to rising sustainability trends.
Market Projections To bring EcoChill to market, Lambda must invest in specialized manufacturing equipment at the start of the project. The key financial details are as follows:
Initial
Investment
: Lambda must make an investment of $1 900 000at the
start of the project.
Expected
Operating Profits
:By
the end of the first year, the company anticipates earning
$700 000in operating profit.
By
the end of the second year, operating profit is projected at
$600 000.By
the end of the third year, the expected operating profit is
$500 000.Discount
Rate
: 10%
============== Instructions ====================== Round all numerical answers to
Use + for cash inflows and – for cash outflows.
Do not add spaces before, after, or within the numbers you enter.
============= Questions ============================
What is the present value of cash flow at the beginning of the project (Year 0)?
What is the present value of cash flow at the end of Year 1?
What is the present value of cash flow at the end of Year 2?
What is the present value of cash flow at the end of Year 3?
What is the net present value of the project?
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