The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all their restaurants. This is expected to increase cash flows by $11 million per year for the next five years
If the discount rate is 5.3%, were the owners correct in making the decision to install donut makers?
A) No, as it has a net present value (NPV) of -$4.45 million.
B) No, as it has a net present value (NPV) of -$2.22 million.
C) Yes, as it has a net present value (NPV) of $13.34 million.
D) Yes, as it has a net present value (NPV) of $22.23 million.
Answer: D
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