Investment Decisions-investment-decisions.png

Question: You have decided to start a new magazine. Minum will be targeted at sensitive guys and will have regular articles on abstinence, temperance and cultural events such as opera and the symphony. You estimate your magazine will cost $510,074.04 in start-up costs. Annual expenses are expected to be $125,000 and subscription and advertising revenue is expected to total $200,000 for each of the first two years and $300,000 in each of the following three years after which time you will sell your magazine for $400,000. Your MARR is 15% (remember, all cash outflows including annual expenses occur at the beginning of the year and inflows at the end of the year).

1. Should you invest? What is the NPV?
2. You are worried that interest rates may rise what is the maximum rate that would still make this an acceptable project?
3. Your accountant has told you your selling price is too optimistic, what is the minimum selling price that would make this a worthwhile investment?
4. How much could your start up costs increase by and still make this a worthwhile investment?
5. Right after paying the start-up costs and first year’s expenses you decided to sell – how much money should you ask for?
6. You have decided that the consumption of beer is not an appropriate activity for men and will not accept beer ads – what is the maximum annual decrease in revenue that would still make this a worthwhile investment?

So far, I have $50,000 for question 1 and 17.27% for question 2. Can someone please help me with question 3 to 6? Thank you!