Question: A firm is evaluating a cost-saving project that is expected to save the firm $225,000 before taxes each year. The companys tax rate is 30%.
A firm is evaluating a cost-saving project that is expected to save the firm $225,000 before taxes each year. The companys tax rate is 30%. The project requires equipment that will cost $1.35 million to install. The equipment has a 10-year lifetime and its value will be depreciated to zero over its life. It is expected that the equipment will be able to be sold for $50,000 in 10 years. The project also requires an initial net working capital investment of $5,000, which will be recouped at the end of the project. The required return for this project is 10%. a. (8 points) Find the project NPV. b. (3 points) Find project PI. c. (3 points) Find project payback period. d. (2 points) Should they pursue the project? Why or why not?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
