Should Lee Manufacturing Accept the Investment Opportunity?

Based on the net present value calculation of $0, should Lee accept the investment opportunity?

a. Yes

b. No

Answer:

Based on a net present value (NPV) calculation resulting in $0, Lee Manufacturing should be indifferent regarding accepting the investment.

Based solely on the net present value (NPV) calculation resulting in a value of $0, Lee Manufacturing should be indifferent regarding accepting the investment. An NPV of $0 indicates that the expected cash inflows from the investment are equal to the initial investment cost, resulting in no net gain or loss.

However, it is important to note that the decision to accept or reject an investment should not be based solely on the NPV calculation. There are other factors and considerations that need to be taken into account, such as the company's required rate of return, the potential risks and uncertainties associated with the investment, the strategic fit with the company's objectives, and the availability of alternative investment opportunities.

Lee Manufacturing should carefully evaluate these additional factors before making a final decision.