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New Tech Product: Growth and Decline

CORPFN-14X8DT

Your high-tech company has just launched a hot new gadget. Financial analysts predict that the new product will generate profits for $1,500,000, starting next year and, after that, growing at a rate of 7% for the next 4 years. At this point, competitors will likely enter the market with similar products and drive your company's profits down at a rate of 2% per year forever.

The interest rate is 8%. What is the present value of the profits generated by your new product?

A

$6,802,521

B

$36,717,466

C

$7,279,683

D

$18,985,518