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The Owners of a Chain of Fast-Food Restaurants Spend $28

Question 75

Multiple Choice

The owners of a chain of fast-food restaurants spend $28 million installing donut makers in all 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 in making the decision to install donut makers?


A) Yes, as it has a net present value (NPV) of $8.74 million.
B) No, as it has a net present value (NPV) of-1.68 million.
C) No, as it has a net present value (NPV) of -$2.25 million.
D) Yes, as it has a net present value (NPV) of $13.56 million.

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