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The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,000 per year. She
The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,000 per year. She constructs the above graph, which shows the net present value (NPV) as a function of the discount rate. At what dollar value should the NPV profile cross the vertical axis?
100000 50000 0 T T T NPV 1 2 3 4 A 5 6 7 8 9 10 -50000 -100000 -150000 - 200000 A. $1,000,000 B. $780,000 C. Cannot be determined because inadequate information is given. D. The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuityStep by Step Solution
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