Determine by present worth analysis

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A project will require the investment of $108,000 in equipment (sum-of-years'-digits depreciation with a depreciable life of 8 years and zero salvage value) and $25,000 in raw materials (not depreciable). The annual project income after all expenses except depreciation have been paid is projected to be $24,000. At the end of 8 years the project will be discontinued and the $25,000 investment in raw materials will be recovered. Assume a 34% combined income tax rate for this corporation. The corporation wants a 15% after-tax rate of return on its investments. Determine by present worth analysis whether this project should be undertaken.

Reference no: EM131810275

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