M.S. Computers is considering the viability of building a new production facility on a piece of property. The land is presently vacant and can be sold for the current market value of $700,000. The factory building will cost $650,000 and equipment costing $400,000 is needed. CCA rates on the building and equipment are 10% and 20% respectively. Operating savings from the new facility are expected to be $445,000 before tax, per year for the next 8 years. M.S. Computers expects to dispose of the property at the end of the 8 years for $700,000 (this amount is solely the anticipated value of the land, the building and equipment will have no value). The firm's tax rate is 40% and its cost of capital is 14%.

Answer rating: 100% (QA)

Answer Statement of project viability A Present value free ... View the full answer