Question
Please explain by steps The owners of a chain of fast- food restaurants spend $30 million installing donut makers in all their restaurants. This is
Please explain by steps
The owners of a chain of fast- food restaurants spend $30 million installing donut makers in all their restaurants. This is expected to increase cash flows by $8 million per year for the next five years. If the discount rate is 6.2%, were the owners correct in making the decision to install donut makers?
A) Yes, as it has a net present value (NPV) of $2.11 million.
B) No, as it has a net present value (NPV) of -$0.70 million.
C) No, as it has a net present value (NPV) of -$0.35 million.
D) Yes, as it has a net present value (NPV) of $3.52 million.
The correst answer is D, but how?
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