Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should the company invest in this project? a.no, because the rate of return on the project is less than the desired rate of return used to compute the present value of the future cash flows b.yes, because the rate of return on the project exceeds the desired rate of return used to compute the present value of the future cash flows c.no, because the net present value is $17,000 d.yes, because the rate of return on the project is equal to the desired rate of return used to compute the present value of the future cash flows

Net Present Value (NPV) shows whether we are able to generate the required return on the project of…

Answered: Brunette Company is contemplating…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should the company invest in this project?

	a.	no, because the rate of return on the project is less than the desired rate of return used to compute the present value of the future cash flows
	b.	yes, because the rate of return on the project exceeds the desired rate of return used to compute the present value of the future cash flows
	c.	no, because the net present value is $17,000
	d.	yes, because the rate of return on the project is equal to the desired rate of return used to compute the present value of the future cash flows

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