Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should the company invest in this project?

Question

Quizplus · Accepted Answer

CThe company should not invest in the project because the present value of the future cash flows ($163,000) is less than the amount to be invested ($180,000), indicating that the rate of return on the project is less than the desired rate of return. Additionally, the net present value is negative ($17,000), further suggesting that the investment would not meet the company's financial criteria.

Brunette Company Is Contemplating Investing in a New Piece of Manufacturing