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Caroline's Candles would like to buy $134,000 of new candle-making equipment. However, the company has a major loan maturing in three years and needs...
Caroline's Candles would like to buy $134,000 of new candle-making equipment. However, the company has a major loan maturing in three years and needs this money at that time to avoid bankruptcy. The candle-making equipment is expected to increase the cash flows by $27,000 in the first year, $48,000 in the second year, and $69,000 a year for the following two years. Should Caroline's Candles buy the equipment at this time? Why or why not?
a. yes; because the money will be recovered within four years
b. yes; because the money will be recovered within three years
c. yes; because the money will be recovered within two years
d. no; because the project never pays back
e. no; because the money will not be recovered in time to pay the loan