The Boring Corporation is considering a 3-year project with an initial cost of $930,000. The project will not directly produce any sales but will reduce operating costs by $450,000 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 $140,000. The tax rate is 34 percent. The project will require $25,000 in extra inventory for spare parts and accessories. Should this project be implemented if The Boring Corporation requires a rate of return of 13 percent? Why or why not? Multiple Choice yes; The NPV is $76,491.89 no; The NPV is $101,491.89 yes; The NPV is $107,200.00 yes; The NPV is $4,129.14 ○ yes; The NPV is $190,963.03
The Boring Corporation is considering a 3-year project with an initial cost of $930,000. The project will not directly produce any sales but will reduce operating costs by $450,000 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 $140,000. The tax rate is 34 percent. The project will require $25,000 in extra inventory for spare parts and accessories. Should this project be implemented if The Boring Corporation requires a rate of return of 13 percent? Why or why not? Multiple Choice yes; The NPV is $76,491.89 no; The NPV is $101,491.89 yes; The NPV is $107,200.00 yes; The NPV is $4,129.14 ○ yes; The NPV is $190,963.03
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The Boring Corporation is considering a 3-year project with an initial cost of $930,000.
The project will not directly produce any sales but will reduce operating costs by
$450,000 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 $140,000. The tax rate is 34 percent. The project will require $25,000 in extra
inventory for spare parts and accessories. Should this project be implemented if The
Boring Corporation requires a rate of return of 13 percent? Why or why not?
Multiple Choice
yes; The NPV is $76,491.89
no; The NPV is $101,491.89
О
yes; The NPV is $107,200.00
О
yes; The NPV is $4,129.14
о
yes; The NPV is $190,963.03
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