Otobai Company in Osaka, Japan is considering the introduction of an electrically powered motor scooter for...

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Finance

Otobai Company in Osaka, Japan is considering the introductionof an electrically powered motor scooter for city use. The scooterproject requires an initial investment of ¥16.8 billion. The costof capital is 9%. The initial investment can be depreciated on astraight-line basis over the 10-year life of the project. Profitsare taxed at a rate of 50%. Consider the following projectestimates:
Market size 1.28 million
Market share .1
Unit price ¥ 580,000
Unit variable cost ¥ 540,000
Fixed cost ¥ 2.18 billion
What is the NPV of the electric scooter project? (A negativeamount should be indicated by a minus sign. Do not roundintermediate calculations. Enter your answer in billions rounded to3 decimal places.)

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Solution NPV of the electric scooter project 1975 billion Working Notes NPV initial investment Operating cash flow x PVIFA 9 10 initial investment 168 billion Calculation of Operating See Answer

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