Wu and Chu Chocolates Emporium (WCCE) is considering the acquisition of new production equipment. Based on medical

Question:

Wu and Chu Chocolates Emporium (WCCE) is considering the acquisition of new production equipment. Based on medical studies extolling the health benefits of daily chocolate intake, demand is expected to grow. WCCE has assembled the following data concerning the possible expansion:

The cost of capital for WCCE is 14%.
Required:
(a) Calculate the expected cash inflow for each year and determine the expected net present value, NPV.
(b) Should WCCE buy the new 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... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...