Use the information for the question(s)below.
-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?
A)$780,000
B)$1,000,000
C)Cannot be determined because inadequate information is given.
D)The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.

Question

Use the information for the question(s)below. 
-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?
A)$780,000 
B)$1,000,000 
C)Cannot be determined because inadequate information is given. 
D)The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.

Quizplus · Accepted Answer

The Answer of Use the information for the question(s)below. 
-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?
A)$780,000 
B)$1,000,000 
C)Cannot be determined because inadequate information is given. 
D)The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.

Use the Information for the Question(s)below