Cash flows Reliable Electric, a major Ruritanian producer of electrical products, is considering a proposal to manufacture a new type of industrial electric motor that would replace most of its existing product line. A research breakthrough has given Reliable a two-year lead on its competitors. The project proposal is summarized in Table 6.4.
a. Read the notes to the table carefully. Which entries make sense? Which do not? Why or why not?
b. What additional information would you need to construct a version of Table 6.4 that makes sense? Construct such a table and recalculate NPV. Make additional assumptions as necessary