Please show formulas P106 NPV for varying costs of capitalDane Cosmetics is evaluating a new...
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P106 NPV for varying costs of capitalDane Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $24,000 and will generate after-tax cash inflows of $5,000 per year for 8 years. For each of the costs of capital listed, (1) calculate the net present value (NPV), (2) indicate whether to accept or reject the machine, and (3) explain your decision.
The cost of capital is 10%.
The cost of capital is 12%.
The cost of capital is 14%.
P10-6
Cost of Capital
10%
12%
14%
Initial investment
After-tax inflows
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
NPV =
Accept or reject?
Answer & Explanation
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