Ahmed bought a store two years ago for $250,000. He leased it out at $4,000 a month. Now he is considering the option to cancel the lease and use the location as a clothing store. About two months ago, Ahmed changed the flooring of the store at a cost of $20,000. He estimates that the machinery for the clothing store will cost $150,000. Ahmed expects the net operating cash flows to be $35,000 annually for 5 years, after which he plans to scrap the remaining inventory and retire. If he opens this new store, the sales from his other clothing store would drop by 10%. Ahmed wants a return of 9% on his investment or else he would not go ahead with his plans.

The $150,000 machinery expenditure would be included as the initial cost in the calculation of NPV.

Question 19 options:

	True
	False