Directly produce any sale but will reduce operating costs

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Reference no: EM131360882

Thornley Machines is considering a 3-year project with an initial cost of $900,000. The project will not directly produce any sales but will reduce operating costs by $445,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated $96,000. The tax rate is 34 percent. The project will require $24,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 12 percent? Why or why not?

yes; The NPV is $50,760.00

no; The NPV is $112,585.76

yes; The NPV is $12,294.30

yes; The NPV is $88,585.76

yes; The NPV is $174,047.49

Reference no: EM131360882

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