Company weighted average cost of capital

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Reference no: EM131878214

Comazzi Construction Company (CCC) is considering a project, whichinvolves purchasing autility drill. The drillwill be used in the road construction division of the company. Theprice of the drill delivered is$30,000 today; however, it also cost $5,000 today to install the drill to make it complete to be used. The drillis in 5 year MACRS class life for depreciation. Due to the efficiency of the drill, labor cost of the division will be reduced by $10,000 per year and revenue of the division will be increased by $15,000 per year for the next six years. CCC tax rate is 34% and the company’s weighted average cost of capital is 12 percent. Please adviseCCC, based on NPV and MIRR, whether to take this project or not. Explain youradvice and approach in 5 lines and show your complete calculations.

Reference no: EM131878214

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