A firm is trying to determine if it should launch a product. The product has an expected life of five years. It will bring in cash flows of $10,000 in each of the first three years and then $5,000 in the last two years. The company estimates that it will invest $30,000 in product research and development costs. Assume a discount rate of 8%. Based on NPV, what should the firm do?
a. Launch the product because NPV is greater than the amount to be invested
b. Not launch the product because NPV is greater than the amount to be invested
c. Launch the product because the amount to be invested is greater than NPV
d. Not launch the product because the amount to be invested is greater than NPV
a. Launch the product because NPV is greater than the amount to be invested
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On August 1 . 2014, B. Amherst Company reacquired 4,000 shares of its $15 par value common stock for $18 per share. Amherst uses the cost method to account for treasury stock. What journal entry should Amherst make to record the acquisition of treasury stock?
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