​Use the Following Setup for Question

question 75

Multiple Choice

​Use the following setup for question
A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal cost are $15.The firm currently charges $18 per unit.
-​If the interest is 5%,should the firm undertake the investment?

• A)​Yes,since NPV=0
• B)Yes,since NPV<0
• C)Yes,since NPV>0
• D)​No,since NPV=0

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Definitions:

Business Plan

A formal written document that outlines the strategy, goals, financial projections, and operational guidelines for starting and running a business.

Feasibility

The assessment of the practicality or possibility of a proposed project or system.

Demographics

Statistical data relating to the population and particular groups within it, used for marketing and policy-making purposes.

Obtaining Financing

Obtaining Financing refers to the process of securing funds needed to start, operate, expand, or sustain a business, often through loans, investments, or other forms of financial support.