Hank Auto in Tokyo, Japan is considering the introduction of an electrically powered bike for city use. The bike project requires an initial investment of ¥15.6 billion. The cost of capital is 11%. The initial investment can be depreciated on a straight-line basis over the 10-year life of the project. Profits are taxed at a rate of 50%.
Consider the following project estimates:
Market size 1.16 million
Market share .1 Unit price ¥ 460,000 Unit
variable cost ¥ 420,000
Fixed cost ¥ 2.06 billion
A. What is the NPV of the electric bike project?