Costner Inc would like to introduce its new haircutting machine, the “

Costner Inc would like to introduce its new haircutting machine, the “terminator.” The machine will cost $15,000 today. As a result of purchasing the machine, Costner expects to give 5,000 more haircuts for $8 each.

In the first year, Costner will give 2,000 more haircuts, and in the second year Costner will give 3,000 more haircuts. What is the net present value (NPV) associated with purchasing the terminator if Costner’s cost of capital is 9%? Round answer to the nearest whole dollar amount.
A) -$10,640
B) $19,879
C) $20,485
D) $19,380
E) -$19,879

ANSWER

B