A Convenience Store Owner Is Contemplating Putting a Large Neon

question 121

Multiple Choice

A convenience store owner is contemplating putting a large neon sign over his store.It would cost $50,000,but is expected to bring an additional $24,000 of profit to the store every year for five years.Would this project be worthwhile if evaluated using a payback period of two years or less and if the cost of capital is 10%?

• A)Yes,since it will pay back its initial investment in two years.
• B)Yes,since the value of the cash flows into the store,in present dollars,are greater than the initial investment.
• C)Yes,since the cash flows after two years are greater than the initial investment.
• D)No,since the value of the cash flows over the first two years are less than the initial investment.
• E)Yes,since the NPV is positive.

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