Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 16 units per year at $301,000 net cash flow per unit for the next four years. The engineering department has come up with the estimate that developing the machine will take a $14.4 million initial investment. The finance department has estimated that a discount rate of 13 percent should be used.
a. What is the base-case NPV? (Enter your answer in dollars, not millions of dollars (e.g. 1,234,567). Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)
Base-case NPV $
b. If unsuccessful, after the first year the project can be dismantled and will have an aftertax salvage value of $10.6 million. Also, after the first year, expected cash flows will be revised up to 21 units per year or to 0 units, with equal probability. What is the revised NPV? (Enter your answer in dollars, not millions of dollars (e.g. 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)
Revised NPV $