Question

. Volunteer Vegetables is considering introducing a new broccoli dish. It will cost $20,000 to develop...

. Volunteer Vegetables is considering introducing a new broccoli dish. It will cost $20,000 to develop and the resulting cash flows will be either 4 years of $10,000 cash flows (probability = 40% ) or 4 years of $5,000 cash flows (probability = 60%). VV's WACC is 10%. Calculate the expected NPV of the project.     

Suppose VV can continue selling the new broccoli dish after the 4 years is up and continue to receive the same cash flows it received the first 4 years for another  4 years if it spends $20,000 to redesign the package and tweak the recipe. What is the expected NPV of this project now? Assume all cash flows are discounted at the WACC

Homework Answers

Answer #1

Expected Cash Flow = 10000 * 40% + 5000 * 60% = $7000

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