Two Questions

The owners of a fast food restaurant spend 28 million installing donut makers in all in their restaurants. This is expected to increase cash flows by 10
million per year for the next five years. If the discount rate is 6.5% were the owners correct making the the decision to install donut makers?

A) No as it has a NPV of -2.25 million

B) No as it has a NPV of -1.68 million

C) Yes as it has a NPV of 8.74 million

D) Yes as it has a NPV of 13.56 million

An orcharder spends 100000 to plant pomegranate bushes. It will take 4 years for the bushes to provide a usable crop. He estimates that every year for the
next 20 years after that he will sell enough worth 10000 per year. If the discount rate is 8% what is the net present value of this investment?

A) -27834

B)-12897

C) 108

D) 3268