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What is the npv of the projectshould the project be

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Reference no: EM13572003

Stanley Company has obtained the following information about a proposed project:

Annual cash operating savings (excluding depreciation)

for 5 years (end of year)                                                        $50,000

Depreciation expense per year for tax purposes                    $33,000

Estimated salvage value in 5 years                                        $10,000

Cost of equipment                                                               $175,000

Required rate of return                                                                10%

Income tax rate                                                                            40%

Estimated useful life (in years)                                                         5

Depreciation method for tax purposes                            Straight-line

Present value of ordinary annuity of one

at 10% for 5 periods                                                                3.7908

Present value of one at 10% for 5 periods                               0.6209

A) What is the NPV of the project?

B) Should the project be undertaken?

Reference no: EM13572003

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