Equipment is depreciated straight-line to zero book value

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Reference no: EM13721575

Thornley Machines is considering a 3-year project with an initial cost of $660,000. The project will not directly produce any sales but will reduce operating costs by $400,000 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 $72,000. The tax rate is 34 percent. The project will require $16,000 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?

Reference no: EM13721575

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