Question
A local bakery is thinking of starting selling ice-cream cakes. It will be necessary to spend $1,300 on buying ice-cream making equipment. It is planning
A local bakery is thinking of starting selling ice-cream cakes. It will be necessary to spend $1,300 on buying ice-cream making equipment. It is planning to sell ice-cream cakes for 9 years and generate $800 in annual after-tax profits. Like other local ice-cream sellers, it is expecting to be able to make a 9% annual return on this investment.
The bakery is wondering if it's correctly estimating the annual sales of these ice-cream cakes. Calculations can show that if the annual after-tax profits turn out to be $200 lower than the bakery's original estimate, then the estimated Net Present Value of the project will Increase or decrease by how much%
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