The owner of a hair salon spends $1,000,000 to renovate its premises

The owner of a hair salon spends $1,000,000 to renovate its premises

The owner of a hair salon spends $1,000,000 to renovate its premises

The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,000 per year. She constructs the above graph, which shows the net present value (NPV) as a function of the discount rate. If her discount rate is 6%, should she accept the project?.9px;=”” currentcolor;=”” 0px=”” 12px=””>Yes, because the NPV is positive at that rate..9px;=”” currentcolor;=”” 0px=”” 12px=””>No, because the NPV is negative at that rate..9px;=”” currentcolor;=”” 0px=”” 12px=””>No, because the NPV is positive at that rate..9px;=”” currentcolor;=”” 0px=”” 12px=””>Cannot be determined from the information given.The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,000 per year. She constructs the above graph, which shows the net present value (NPV) as a function of the discount rate. At what dollar value should the NPV profile cross the vertical axis?$780,000$1,000,000Cannot be determined because inadequate information is given.The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.

 

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