Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:The owners of a chain of fast-food restaurants spend $26 million installing donut makers in all their restaurants. This
is expected to increase cash flows by $9 million per year for the next five years. If the discount rate is 6.7%, were the
owners correct in making the decision to install donut makers?
A. No, as it has a net present value (NPV) of - $1.12 million.
B. Yes, as it has a net present value (NPV) of $11.2 million.
O C. No, as it has a net present value (NPV) of - $2.24 million.
D. Yes, as it has a net present value (NPV) of $6.72 million.
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