Discuss the below:
Q: A software company is considering translating its program into French. Each unit of the program sells for $50 and incurs a variable cost of $10 to produce. Currently, the size of the market for the product is 300,000 units per year, and the English version of the software has a 30% share of the market. The company estimates that the market size will grow by 10% a year for the next five years, and at 5% per year after that. It will cost the company $6 million to create a French version of the program. The translation will increase its market share to 40%. Given a 10-year planning horizon, for what discount rates is it profitable to create the French version of the software?
Software project
Inputs
Fixed cost of new version
Unit selling price
Unit variable cost
Current market size
Growth of market
For each of first 5 years
For each of next 5 years
English version market share
Market share with new version
Profit model Without French version With French version
Year Market size Units sold Variable cost Revenue Units sold Variable cost Revenue
Discount rate (trial value)
NPV without French version
NPV with French version
Difference