Question: Misty Higgin manager of the Hass Music Hall is considering

Misty Higgin, manager of the Hass Music Hall, is considering the opportunity to expand the company’s concession revenues. Specifically, she is considering whether to install a popcorn machine. Based on market research, she believes that the machine could produce incremental cash inflows of $3,200 per year. The purchase price of the machine is $8,500. It is expected to have a useful life of three years and a $2,500 salvage value. Ms. Higgin has established a desired rate of return of 16 percent.

a. Calculate the net present value of the investment opportunity.
b. Should the company buy the popcorn machine?

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  • CreatedFebruary 07, 2014
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