Which involves purchasing utility drill

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Reference no: EM131878190

Comazzi Construction Company (CCC) is considering a project, which involves purchasing a utility drill. The drill will be used in the road construction division of the company. The price of the drill delivered is $30,000 today; however, it also cost $5,000 today to install the drill to make it complete to be used. The drill is in 5 year MACRS class life for depreciation. Due to the efficiency of the drill, labor cost of the division will be reduced by $10,000 per year and revenue of the division will be increased by $15,000 per year for the next six years. CCC tax rate is 34% and the company’s weighted average cost of capital is 12 percent. Please advise CCC, based on NPV and MIRR, whether to take this project or not. Explain your advice and approach in 5 lines and show your complete calculations.

Reference no: EM131878190

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