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Project after-tax required rate of return

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GMBA Ltd is considering installing a new bottling machine that costs $170,000 plus installation costs of $30,000. The new machine will generate cash revenues of $260,000 annually and has associated cash expenses of $145,000 per annum. The machine itself will be depreciated to a salvage value of $20,000 over a 12-year period using the straight-line depreciation method. At the end of the 12th year, the machine will then be sold for $16,000. The corporate tax rate is 35% per annum. The project's after-tax required rate of return is 6% per annum. Should GMBA Ltd accept this project? Why?

Reference no: EM133276110

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