A bakery is deciding whether to buy an extra van to help deliver its products. The van will cost $28,000, but is expected to increase profits by $6,500 per year over the five years of its working life. Which of the following is the correct net present value (NPV) profile for this purchase?

Question

Quizplus · Accepted Answer

D) Using a financial calculator, enter CF0 = -28,000, CF1 = 6,500, F1 = 5;
calculate NPV for I = 0% = $4,500; calculate IRR = 5.18%.

A Bakery Is Deciding Whether to Buy an Extra Van