Should you make the investment and why or why not

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Reference no: EM132055753

Your weighted average cost of capital is 12%, but your hurdle is 14%. You are looking at an investment of 8,000,000 with a useful life of 7 years and no scrap value.

Sales will increase by 2,000,000 per year. There is no inventory, but a 100,000 increase in accounts receivable is required.

The tax rate is 40%. There is no cost of goods sold and SG&A is 50,000 per annum. Should you make the investment and why or why not?

Reference no: EM132055753

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