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 they invest in this project?
A) no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows
B) no, because net present value is +$17,000
C) yes, because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows
D) yes, because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows

Question

abhlpeters6196 abhlpeters6196

03-12-2019
Business

contestada

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 they invest in this project?
A) no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows
B) no, because net present value is +$17,000
C) yes, because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows
D) yes, because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows

Respuesta :

Otras preguntas

the rhinoceros part 2 Jean becomes ill and complains of _____?

movement along the earths surface caused by an earthquake

When President George W. Bush declared that he would "make no distinction between those who committed these acts and those who harbor them," he was specifically

What was the outcome of salutary neglect?

1.Which sentence does not contain misplaced or dangling modifiers? A.Riding along in our car, we saw a moose on the way home. B.On the way home, we saw a moose

Which information is not necessary to solve this problem? Juanita reads 20 pages per night in her library book. She reads 4 nights a week and her book has 200

Roger Williams was the founder of which of the original thirteen colonies? Connecticut Delaware Georgia Maryland Massachusetts New Hampshire New Jersey New York

Which of the following writings heavily influenced humanist thinkers and writers like Petrarch? Islamic Frank Classical Byzantine

how do you write words to match the expression 24-(6+3)

The first government dealt with the Native American problem by _____. A. Getting an army together and running them off. B. Not letting any more settlers move to

beritop1089 beritop1089 · Answer 1 · 2019-12-11T02:30:10+01:00

Answer:

A) no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows

Explanation:

The NPV is calculated by subtracting the initial investment from the Present value of the project's future cashflows;

NPV = 163,000 - 180,000

NPV = -17,000 , this eliminates choice B

NPV and IRR rule always agree on the decision to accept or reject a project so long as the pattern of cashflows is the same.

Since, the NPV is negative, this project will be rejected. For IRR rule to agree with this, the internal rate of return will also be less than the discount rate used to calculate the present value of future cashflows, making choice A correct.