Considering a project with an initial fixed asset cost

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Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated salvage of $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. The tax rate is 35 percent. The project will require $45,000 of inventory which will be recouped when the project ends. Should this project be implemented if the firm requires a 20 percent rate of return? Why or why not? a. No; The NPV is -$224,937.49 b. No; The NPV is -$156,627.21 c. Yes; The NPV is $251,860.34 d. Yes; The NPV is $387,516.67 e. Yes; The NPV is $466,940.57 please show me the steps.

Reference no: EM13908856

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