Problem:
Raphael Restaurant is considering the purchase of a $9,900 soufflé maker. The soufflé maker has an economic life of six years and will be fully depreciated by the straight-line method. The machine will produce 1,950 soufflés per year, with each costing $2.35 to make and priced at $5.20. Assume that the discount rate is 14 percent and the tax rate is 40 percent.
Required:
Question 1: What is the NPV of the project?
Question 2: Should Raphael make the purchase?
Note: Please provide full description.