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Worthwhile use of firm money

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A project under review will require an initial outlay of $1,100,000 for equipment. Net annual inflows for ten years are projected to be $220,000 per year. However, an upgrade costing $300,000 will probably be required toward the end of the sixth year. When the project shuts down-at the end of the tenth year-the equipment involved should have a positive salvage value of $90,000. If the firm requires 7% of all projects it undertakes, is this a worthwhile use of the firm's money?

Reference no: EM132171888

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