Thornley Machines is considering a 3-year project with an initial cost of $840,000. The project will not
Question:
Thornley Machines is considering a 3-year project with an initial cost of $840,000. The project will not directly produce any sales but will reduce operating costs by $435,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated $90,000. The tax rate is 34 percent. The project will require $22,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 10 percent? Why or why not?
yes; The NPV is $74,000.00
yes; The NPV is $65,335.09
yes; The NPV is $149,880.54
no; The NPV is $171,880.54
yes; The NPV is $229,996.24
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt , Eugene F. Brigham