NPV for varying costs of capital Empire Hotel is considering acquiring new flat-panel displays to replace the antiquated computer terminals at the registration desk. The new computer displays require an initial investment of $235,000 and will generate after-tax cash inflows of $65,000 per year for 5 years. For each of the costs of capital listed, (1) calculate the net present value (NPV), (2) indicate whether to accept or reject the machine, and (3) explain your decision.
a. The cost of capital is 8%.
b. The cost of capital is 10%.
c. The cost of capital is 15%.