Directly produce any sales but will reduce operating costs

Assignment Help Financial Management

Reference no: EM13929008

Thornley Machines is considering a 3-year project with an initial cost of $690,000. The project will not directly produce any sales but will reduce operating costs by $405,000 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 $75,000. The tax rate is 34 percent. The project will require $17,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 13 percent? Why or why not?

Reference no: EM13929008

Questions Cloud

Amount of slack associated with the first constraint : At the optimal solution, what is the amount of slack associated with the first constraint?

Probability after tax cash flow : Wheel has two other possible investment opportunities, which are mutually exclusive, and independent of Investment A above. Both investments will cost $120,000 and have a life of 6 years. Investment B Investment C Probability After Tax Cash Flow Prob..

Determine the reorder point : Alexis Co. uses 800 units of a product per year on a continuous basis. The product has a fixed cost of $50 per order, and its carrying cost is $2 per unit per year. determine the average level of inventory (365-day year to calculate daily usage) dete..

Cost of equity is incorrect percent : Stock in Country Road Industries has a beta of .85. The market risk premium is 8 percent, and T-bills are currently yielding 5 percent. The company's most recent dividend was $1.60 per share, and dividends are expected to grow at a 6 percent annual r..

Directly produce any sales but will reduce operating costs : Thornley Machines is considering a 3-year project with an initial cost of $690,000. The project will not directly produce any sales but will reduce operating costs by $405,000 a year. The project will require $17,000 in extra inventory for spare part..

What amount would liken report on the statement : What amount would Liken report on the statement of cash flows related to the sale of the land?

Assume the risk-free rate and the beta remain unchanged : Stock has a required return of 12%; the risk-free rate is 3.5%; and the market risk premium is 6%. What is the stock's beta? If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume the risk-free ra..

Explain the basis of any liability in the tort of negligence : In relation to the energy drinks that were described in the segment, explain the basis of any liability in the tort of negligence that the manufacturers of those drinks might have to Australian consumers.

Is security mechanisms and practices : Organizations around the world often assess their IS security mechanisms and practices by using the Trusted Computer System Evaluation Criteria (TCSEC) or Information Technology Security Evaluation Criteria (ITSEC). The two standards are similar, tho..

User Account

All Pages