Question

Ooredoo Oman is considering of developing a new product line.
Development will take six years and will cost 200,000 Omani Rials
per year. Once the product is ready, it is expected to make 300,000
Omani Rials per year for the next 10 years. Assume the cost of
capital is 10 percent. **(3 points)**

i) Calculate the Net Present Value
of this investment opportunity, assuming all the cash flows occur
at the end of each year. Should the company make the investment?
**(1.5 points)**

Answer #1

NPV for the project is 169,482

Hence, the investment in the project should be made. Refer calculation below.

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ch 7
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