Ask Question
BusinessBusiness
24 April, 17:02

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

+4
Answers (1)
  1. 24 April, 20:05
    0
    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.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Benchmarking is a process
Answers (1)
Cahuilla Corporation predicts the following sales in units for the coming four months: April May June July Sales in Units 370 410 430 370 Each month's ending finished goods inventory should be 30% of the next month's sales.
Answers (1)
Clothing Frontiers began operations on January 1 and engages in the following transactions during the year related to stockholdersâ equity. January 1 Issues 700 shares of common stock for $34 per share.
Answers (1)
2. Where do you fit in with the definition of economics
Answers (1)
Tsypkin Company's budgeted sales quantity was 80,000 units of product. The company's accountant, using regression analysis, applied the following cost formula to estimate costs at the master budget level for this year: Total cost = $500,000 + ($5.
Answers (1)
New Questions in Business
Suppose hypothetically that you buy a lot of food such as tofu, veggie burgers, and organic fruit that are not included in the market basket used to compute the CPI.
Answers (1)
Property taxes on a company's factory building would be classified as a (n) :
Answers (1)
Diane had a plan to improve her responsibility. in order to understand if she has met her goal, she must A. formulate a new goal B. record her progress C. accomplish harder tasks D. ask others for their opinions
Answers (1)
Olivia's employer deducts an amount from her paycheck for the Medicare program. What type of withholding is being deducted from Olivia's paycheck? A) tax exemption B) local withholding C) state withholding D) Social Security withholding
Answers (1)
A popular variation of the accounts receivable turnover is the a. credit risk ratio. b. concentration of credit risk. c. bad debts ratio. d. average collection period.
Answers (1)
Home » Business » 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.
Sign Up Forgot Password?