Smart Technologies Inc., a manufacturer of learning tablets for school-aged children, is considering a new technology production system that will initially cost $7.5 million. Cost savings are estimated to be 20% of the initial $7.5 million investment on annual basis (for each year of the project) and represent savings in inventory and receivables management costs. The system will be used for 15 years and then will be sold for its salvage value, estimated at $3,000,000 at that time. The CCA rate for the production system is 25%. There is no impact on net working capital. The marginal tax rate is 34%. The required return is 14%. 

Required: Would you recommend the company make this investment or not?

Answer rating: 100% (QA)

The net present value of this project is 2720788 To calculate the ... View the full answer