Directly produce any sales but will reduce operating costs

Assignment Help Financial Management

Reference no: EM13810461

Thornley Machines is considering a 3-year project with an initial cost of $1,020,000. The project will not directly produce any sales but will reduce operating costs by $640,000 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 $156,000. The tax rate is 34 percent. The project will require $28,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 16 percent? Why or why not?

yes; The NPV is $244,189.10

no; The NPV is $272,189.10

yes; The NPV is $97,042.85

yes; The NPV is $314,960.00

yes; The NPV is $370,509.74

Reference no: EM13810461

Questions Cloud

Advantages of using hypervisor in enterprise : Examine the technical advantages and disadvantages of using a hypervisor in an enterprise. Compare and contrast the hypervisors from Microsoft (Hyper-V), VMware (ESXi), and Hitachi's (Virtage). Evaluate the effect of hypervisors on the TCO (Total ..

Evaluate the accuracy of the iron triangle model : Analyze information about relationships among Congress, the military bureaucracies, and defense industries. Draw your own conclusion, and support it with facts and with persuasive reasoning, about the impact of these relationships on defense spend..

Estimated that the after-tax terminal value : Walmart is considering opening a small experimental store in New York City. A store is expected to have a long economic life, but the valuation horizon is 15 years. The store in New York is likely to generate revenues of $34M in the first year and th..

What is the profitability index of the project : A project has an initial outlay of $1,160. It has a single payoff at the end of year 6 of $9,960. What is the profitability index (PI) of the project, if the company’s cost of capital is 11.37 percent?

Directly produce any sales but will reduce operating costs : Thornley Machines is considering a 3-year project with an initial cost of $1,020,000. The project will not directly produce any sales but will reduce operating costs by $640,000 a year. The equipment is depreciated straight-line to a zero book value ..

Techniques in terms of course project : Meredith and Mantel (2012) describe top-down and bottom-up budgeting (pp. 289-292). Evaluate these two techniques in terms of your course project. Address the following questions in your posting:

Theology evolution of religions : Theology evolution of Religions

Using the profitability index when evaluating projects : Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of capital is 8.75 percent. What is the PI of a project if the initial costs are $2,371,020 and the project life is estimated as 9 years? The project..

Develop an excel retail or business workbook : You will develop an Excel retail/business workbook and show how to use excel in real life. When learning a business tool like Excel, its power and capabilities are best understood when Excel is used to solve a "REAL LIFE" problem

User Account

All Pages