Griffey & Son operate a plant in Cincinnati and are considering opening a new facility in Seattle. The initial outlay will be $3,500,000 and should produce after-tax net cash inflows of $600,000 per year for 15 years. Due to the effects of the ocean air in Seattle, however, the plant’s useful life may be only 12 years. Cost of capital is 14 percent.

Required

1. Will the project be accepted if 15 years’ useful life is assumed? What if 12 years of useful life is used?

2. How many years will be needed for the Seattle facility to earn at least a 14 percent return?