Jerry operates a cybercaf-cum photocopy center near a college in Tucson, Arizona. Due to the high demand

Question:

Jerry operates a cybercafé-cum photocopy center near a college in Tucson, Arizona. Due to the high demand for photocopying, he is considering installing a second photocopier. The new machine will have higher capacity and improved speed as a result of which Jerry expects annual savings of $4,600 over its economic life of 12 years. The machine will cost $30,000.

1. Suppose Jerry has a required rate of return of 10%. Compute the NPV of the investment in the new photocopier and recommend whether he should buy the machine.

2. Suppose Jerry has a required rate of return of 12%. Compute the NPV of the investment in the new photocopier and recommend whether he should buy the machine.

3. How does the required rate of return affect the NPV of a potential investment?

Fantastic news! We've Found the answer you've been seeking!