Question
11-16
NPV and IRR
John’s Publishing Company, a new service that writes term papers for college students,
provides 11-page term papers from a list of more than 500 topics. Each paper will cost $7.50 and is written by a graduate in the topic area. John’s will pay $20,000 for the rights to all of the manuscripts. In addition, each author will receive $0.50 in royalties for every paper sold. Marketing expenses are estimated to be a total of $20,000 divided equally between Years 1 and 2, and John’s cost of capital is 11 percent. Sales are expected as follows:
YEAR VOLUME
1 10,000 2 7,000 3 3,000
a. What is the payback period for this investment? Its NPV? Its IRR? b. What are the ethical implications of this investment?
NPV and IRR
John’s Publishing Company, a new service that writes term papers for college students,
provides 11-page term papers from a list of more than 500 topics. Each paper will cost $7.50 and is written by a graduate in the topic area. John’s will pay $20,000 for the rights to all of the manuscripts. In addition, each author will receive $0.50 in royalties for every paper sold. Marketing expenses are estimated to be a total of $20,000 divided equally between Years 1 and 2, and John’s cost of capital is 11 percent. Sales are expected as follows:
YEAR VOLUME
1 10,000 2 7,000 3 3,000
a. What is the payback period for this investment? Its NPV? Its IRR? b. What are the ethical implications of this investment?
Answers
Anonymous
what is the answer of this ? badly needed
Anonymous
answer
plz
plz