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 (NPV) is calculated by subtracting the present value of cash outflows (in this case, the initial investment of $150,000) from the present value of cash inflows (in this case, $141,000).

NPV = $141,000 - $150,000 = -$9,000.

Since the NPV is negative, it means that the project is not generating enough return to cover the initial investment, and the company should not invest in this project. Therefore, Option D is the correct answer.

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