Donuts Galore spends $42 million installing donut makers in all its stores. This is expected to increase cash flows by $11.5 million per year for the next seven years. If the discount rate is 5.5%, was Donut Galore correct in making the decision to install donut makers? a. Yes, as it has a net present value (NPV) of $107.35 million. b. No, as it has a net present value (NPV) of – 107.35 million. c. Yes, as it has a net present value (NPV) of $23.35 million. d. No, as it has a net present value (NPV) of -$38.57 million.
Donuts Galore spends $42 million installing donut makers in all its stores. This is expected to increase cash flows by $11.5 million per year for the next seven years. If the discount rate is 5.5%, was Donut Galore correct in making the decision to install donut makers? a. Yes, as it has a net present value (NPV) of $107.35 million. b. No, as it has a net present value (NPV) of – 107.35 million. c. Yes, as it has a net present value (NPV) of $23.35 million. d. No, as it has a net present value (NPV) of -$38.57 million.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Donuts Galore spends $42 million installing donut makers in all its stores. This is expected to increase cash flows by $11.5 million per year for the next seven years. If the discount rate is 5.5%, was Donut Galore correct in making the decision to install donut makers?
a.
Yes, as it has a net present value (NPV) of $107.35 million.
b.
No, as it has a net present value (NPV) of – 107.35 million.
c.
Yes, as it has a net present value (NPV) of $23.35 million.
d.
No, as it has a net present value (NPV) of -$38.57 million.
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