Question

The Boring Corporation 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 The Boring Corporation requires a rate of return of 16 percent? Why or why not?

Multiple Choice

• yes; The NPV is $314,960.00

• yes; The NPV is $370,509.74

• no; The NPV is $272,189.10

• yes; The NPV is $244,189.10

• yes; The NPV is $97,042.85

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