T-Bone Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $150,000. The present value of the future cash flows is $141,000. Should the company invest in this project?

Question

Quizplus · Accepted Answer

The net present value is calculated by subtracting the initial investment from the present value of the future cash flows. In this case, the net present value is -$9,000, indicating that the project is not expected to generate enough cash flows to cover the initial investment and provide a return. Therefore, the company should not invest in this project.

T-Bone Company Is Contemplating Investing in a New Piece of Manufacturing