Donuts Galore spends $42 million installing donut makers in all its stores. This is expected to increase cash flows by $11.5 million per year for the next seven years. If the discount rate is 5.5%, was Donut Galore correct in making the decision to install donut makers?

a. Yes, as it has a net present value (NPV) of $107.35 million.

b. No, as it has a net present value (NPV) of – 107.35 million.

c. Yes, as it has a net present value (NPV) of $23.35 million.

d. No, as it has a net present value (NPV) of -$38.57 million.

Answer rating: 100% (QA)

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