MC algo 10-30 Cash Flows And NPV Cori's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $8,700 per year and will cut annual operating costs by $12,900. The system will cost $45,000 to purchase and install. This system is expected to have a 4-year life and will be depreciated to zero using straight-line depreciation and have no salvage value. The tax rate is 21 percent and the required return is 10.4 percent. What is the NPV of purchasing the pressure cooker? Multiple Choice $1,738 $16,050 −$24,047 −$8,868 $22,103

MC algo 10-30 Cash Flows And NPV Cori's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $8,700 per year and will cut annual operating costs by $12,900. The system will cost $45,000 to purchase and install. This system is expected to have a 4-year life and will be depreciated to zero using straight-line depreciation and have no salvage value. The tax rate is 21 percent and the required return is 10.4 percent. What is the NPV of purchasing the pressure cooker? Multiple Choice $1,738 $16,050 −$24,047 −$8,868 $22,103

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 5PROB

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MC algo 10-30 Cash Flows And NPV

Cori's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $8,700 per year and will cut annual operating costs by $12,900. The system will cost $45,000 to purchase and install. This system is expected to have a 4-year life and will be depreciated to zero using straight-line depreciation and have no salvage value. The tax rate is 21 percent and the required return is 10.4 percent. What is the NPV of purchasing the pressure cooker?

Multiple Choice

$1,738
$16,050
−$24,047
−$8,868
$22,103

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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