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Le Pew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $360,000 and will generate after-tax cash inflows of $62,650
Le Pew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $360,000 and will generate after-tax cash inflows of $62,650 per year for 8 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 6%.
b. The cost of capital is 8%.
c. The cost of capital is 10%.
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