Solution-Should the project be undertaken and explain

Should the project be undertaken and explain

Assignment Help Accounting Basics

Reference no: EM132610793

Stanley Company has obtained the following information about a proposed project:

Annual cash operating savings (excluding depreciation)

for 5 years (end of year) $50,000

Depreciation expense per year for tax purposes $33,000

Estimated salvage value in 5 years $10,000

Cost of equipment $175,000

Required rate of return 10%

Income tax rate 40%

Estimated useful life (in years) 5

Depreciation method for tax purposes Straight-line

Present value of ordinary annuity of one

at 10% for 5 periods 3.7908

Present value of one at 10% for 5 periods 0.6209

Required:

Question A) What is the NPV of the project?

Question B) Should the project be undertaken?

Reference no: EM132610793

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Should the project be undertaken and explain

Reference no: EM132610793

Reference no: EM132610793

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