Section 5

Jean's Juice Company is considering an investment in a new juice machine. The machine will cost $10,000. Jean's Juice uses a corporate hurdle rate (cost of capital) of 18% for all of its projects. If the juice machine project has a positive NPV of $5.00, what does this mean?

Group of answer choices

The project's IRR is probably greater than 18%.

The project should be rejected.

The project earns $5.00 on the investment of $10,000.

The project's payback barely exceeds the minimum requirement for the company.

Harry's Hoagie Sandwich Shop is considering buying a new meat slicing machine to speed up its operations. The company believes that the new machine will increase its cash flows by the following amounts:

Year 1: $5,000; Year 2: $6,500; Year 3: $7,500; Year 4: $8,500

The machine will cost $17,000. Harry's uses a cost of capital of 19% for its investment projects.

Calculate the IRR of this project.

Group of answer choices

20.34%

19.00%

$119.98

26.97%

Eddie's Eclairs is thinking about buying a new convection oven for its bakery. The new oven will increase Eddie's cash flows by the following amounts:

Year 1: $5,000; Year 2: $8,000; Year 3: $10,000; Year 4: 11,000

The oven will cost $13,500.

Eddie's cost of capital is 22% for new projects like this.

Calculate the NPV of this project.

Group of answer choices

$5,454.50

$13,500.00

$7,314.04