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Show formulas s in Finance Page 423of 804 423 CHAPTER 10 Capital Budgeting Techniques...

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s in Finance Page 423of 804 423 CHAPTER 10 Capital Budgeting Techniques NPV for varying costs of capital Dane Cosmetics is evaluating a new fragrance- mixing machine. The machine requires an initial investment of $24,000 and will generate after-tax cash inflows of $5,000 per year for S years. For each of the costs P10-6 of capital listed, (1) calculate the net present ralue (NPV), (2) indicate whether to accept or reject the machine, and (3) explain your decision. a, The cost of capital is 10%. - b. The cost of capital is 12%. c. The cost of capital is 14% 0-6 14% 12% 10% Cost of Capital Initial investment After-tax inflows Year 1 Yea 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 NPV Accept or reject? 0-16

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