Initial net working capital

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Picus Group is considering a three-year project with an initial cost of $867,000. The project will not directly produce any sales but will reduce operating costs by $390,000 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 $30,000. The tax rate is 27.0%. The initial net working capital requirement is $39,000. The working capital will be fully recovered at the end of the project life. Should this project be implemented if Picus Group requires an 9.0% rate of return? Why or why not?

Reference no: EM132483058

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