HP2-H74 Exam Questions and Answers

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Willis, Inc. has a cost of capital of 15 percent and is considering the acquisition of a new machine, which
costs $400,000 and has a useful life of five years. Willis projects that earnings and cash flow will increase
as follows.

The net present value of this investment is:
A. Negative, $64,000
B. Negative, $14,000
C. Positive, $200,000
D. Positive, $18,600
Answer: D
Choice "c" is correct. Positive NPV, $18,600.

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