(c) (d) $300 every 6 months $400 every 6 months CASE STUDY DEVELOPING AND SELLIN
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(c) (d) $300 every 6 months $400 every 6 months CASE STUDY DEVELOPING AND SELLING AN INNOVATIVE IDEA Background Three engineers who worked for Mitchell Engineering, a it was agreed that the system was ready to market and reliably company specializing in public housing development, went to lunch together several times a week. Over time they de- cided to work on solar energy production ideas. After weekend time over several years, they had designed and de- veloped a prototype of a low-cost, scalable solar energy plant for use in multifamily dwellings on the low end and medium- Information sized manufacturing facilities on the upper end: For residen- tial applications, the collector could be mounted along side a With a hefty bank loan and $200,000 of their own capital TV dish and be programmed to track the sun. The generator they were able to install demonstration sites in thre citis n and additional equipment are installed in a closet-sized area the sunbelt. Net cash flow after all expenses, loan repayment. in an apartment or on a floor for multiple-apartment The system serves as a supplement to the electricity provided by the local power company. After some 6 months of testing. state that an electricity bill in high-rises could be reduced by approximately 40% approximately 40% per month. This was great news for low- alot of income dwellers on government subsidy that are required to years, they had designed and depay their own utility bills. for multiple-apartment supply. and taxes for the first 4 years was acceptable: $55,000at teExplanation / Answer
We coclude as follows
Income chart for varioius years
In year 2,3 & 4 profits were increasing at 5 % per annum
year 4-8 profits have been fallling at 5000 per year and thereafter increasing at 5000 per year
Cash inflow at end of 4 years if no sale = 237056.50
if sold for 500000, = 237056.50 + 500000, =737056.50
Case 1 return on investment / total investment
= (Cash inflow- initial investment) / Total Investment
=(737056.50 - 200000) / 200000
= 537056.50 /200000,=2.6853 or 268.53 %
Case 2) is no sale
= (237056.50- 200000) / 200000, =0.18529, or 18.53 %
Year 1 2 3 4 5 6 7 8 9 10 11 12 Net Income 55000 57750 60637.50 63669 40000 35000 30000 25000 30000 35000 40000 45000 Total Return 237056.50 367056.50 517056.50Related Questions
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