Question: ABC Inc. is evaluating a project that will increase annual sales by $175,000 and annual cash costs by $98,000. The project will initially require $130,000

ABC Inc. is evaluating a project that will increase annual sales by $175,000 and annual cash costs by $98,000. The project will initially require $130,000 in fixed assets that will be depreciated straight-line to a zero book value over the 4-year life of the project. The applicable tax rate is 32 percent. ABC Inc. has determined that it requires $20,000 in NWC, has a required rate of return of 12%, and requires all projects to pay back within 3 years. What is the discounted payback period? Using the decision rule, should we accept the project?

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