The owners of a chain of fast-food restaurants spend $27 million installing donut makers in all their restaurants. This is expected to increase cash flows by $12 million per year for the next five years. If the discount rate is 6.5%, were the owners correct in making the decision to install donut makers? ..... O A. No, as it has a net present value (NPV) of - $5 million. O B. Yes, as it has a net present value (NPV) of $23 million. OC. No, as it has a net present value (NPV) of - $2 million. O D. Yes, as it has a net present value (NPV) of $14 million.

The owners of a chain of fast-food restaurants spend $27 million installing donut makers in all their restaurants. This is expected to increase cash flows by $12 million per year for the next five years. If the discount rate is 6.5%, were the owners correct in making the decision to install donut makers? ..... O A. No, as it has a net present value (NPV) of - $5 million. O B. Yes, as it has a net present value (NPV) of $23 million. OC. No, as it has a net present value (NPV) of - $2 million. O D. Yes, as it has a net present value (NPV) of $14 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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You are operating an old machine that is expected to produce a cash inflow of $6,100 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $21,100 but is much more efficient and will provide a cash flow of $11,650 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 14%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost of the purchase price Should you replace your equipment now? O Yes No
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