The project will not directly produce any sales

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Service Experts is considering a 5-year project with an initial cost of $850,000.00. The project will not directly produce any sales but will reduce operating costs by $304,183.35 a year. The equipment is depreciated straight-line to a book value of $5,000.00 over the life of the project. At the end of the project the equipment will be sold for an estimated $40,000.00 before taxes. The tax rate is 35%. The project will require $35,000.00 in extra inventory for spare parts and accessories. Should this project be implemented if the company requires a 9% rate of return? Why or why not?

Reference no: EM133650037

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