BioPharm Inc. recently acquired Cow Biopharmaceuticals Inc., a producer of antib

Question

BioPharm Inc. recently acquired Cow Biopharmaceuticals Inc., a producer of antibodies and Cow-HB to prevent Hepatitis B re-infection in liver transplant patients. The company plans to invest $3.5 million in new manufacturing equipment. The Cow Biologics division is expected to generate revenue of $300,000 and operating cost of $330,000 each month. The new equipment is estimated to have a $700,000 salvage value after 7 years. What is the future worth of this investment if the company's minimum attractive rate of return is 18% per year, compounded monthly.

Explanation / Answer

Future worth of investment =-FV(1.5%,7*12,-30000,0,0) + 700,000 = 4,285,179

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