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Why thornleys require a rate of return of 14 percent

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Thornley Machines is considering a 3-year project with an initial cost of $720,000. The project will not directly produce any sales but will reduce operating costs by $410,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated $78,000. The tax rate is 34 percent. The project will require $18,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 14 percent? Why or why not?

Reference no: EM131828296

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