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. If her discount rate is 6%, should she accept the project?

Yes, because the NPV is positive at that rate.

No, because the NPV is negative at that rate.

No, because the NPV is positive at that rate.

Cannot be determined from the information given.

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?

$780,000

$1,000,000

Cannot be determined because inadequate information is given.

The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.