# Question

Michael’s Bakery is evaluating a new electronic oven. The oven requires an initial cash outlay of $19,000 and will generate after-tax cash inflows of $4,000 per year for eight years. For each of the costs of capital listed,

(1) Calculate the NPV,

(2) Indicate whether to accept or reject the machine, and

(3) Explain your decision.

a. The cost of capital is 10%.

b. The cost of capital is 12%.

c. The cost of capital is 14%.

(1) Calculate the NPV,

(2) Indicate whether to accept or reject the machine, and

(3) Explain your decision.

a. The cost of capital is 10%.

b. The cost of capital is 12%.

c. The cost of capital is 14%.

## Answer to relevant Questions

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