A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to crease cash flows in the first year by $25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and curren marginal cost are S15. The firm currently charges $18 per unit. the interest is 5%, should the firm undertake the investment? O a. Yes, since NPV=0 O b. Yes, since NPV<0 Oc. Yes, since NPV>0 O d. No, since NPV=0
A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to crease cash flows in the first year by $25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and curren marginal cost are S15. The firm currently charges $18 per unit. the interest is 5%, should the firm undertake the investment? O a. Yes, since NPV=0 O b. Yes, since NPV<0 Oc. Yes, since NPV>0 O d. No, since NPV=0
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to
increase cash flows in the first year by S25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and current
marginal cost are S15. The firm currently charges S18 per unit.
If the interest is 5%, should the firm undertake the investment?
O a. Yes, since NPV=0
O b. Yes, since NPV<0
O c. Yes, since NPV>0
O d. No, since NPV=0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa9b7bd52-1bf5-4bcc-a139-5f4ee0902a20%2F2f3324e6-c376-40a3-8c14-5bb981965edb%2Fknkk0g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to
increase cash flows in the first year by S25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and current
marginal cost are S15. The firm currently charges S18 per unit.
If the interest is 5%, should the firm undertake the investment?
O a. Yes, since NPV=0
O b. Yes, since NPV<0
O c. Yes, since NPV>0
O d. No, since NPV=0
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