Misty Higgin, manager of the Hass Music Hall, is considering the opportunity to expand the companys concession

Question:

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 . Ms. Higgin has established a desired rate of return of 16 percent.

Required
a. Calculate the of the investment opportunity.
b. Should the company buy the popcorn machine?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...