Multiple Choice
Use the following setup for question
A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal cost are $15.The firm currently charges $18 per unit.
-If the interest is 5%,should the firm undertake the investment?
A) Yes,since NPV=0
B) Yes,since NPV<0
C) Yes,since NPV>0
D) No,since NPV=0
Correct Answer:
Verified
Correct Answer:
Verified
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