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Thornley Machines is considering a 3-year project with an initial cost of $618,000. The project will...

Thornley Machines is considering a 3-year project with an initial cost of $618,000. The project will not directly produce any sales but will reduce operating costs by $265,000 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 $60,000. The tax rate is 34%. The project will require $23,000 in extra inventory for spare parts and accessories.
Should this project be implemented if Thornley's requires a 9% rate of return? Why or why not?

Please show all work without excel

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ANSWER : YES, PROJECT SHOULD BE IMPLEMENTED AS NPV IS POSITIVE


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