Superior Manufacturers is considering a 3-year project with an initial cost of $846,000. The project will not generate any direct sales, but will reduce operating costs by $295,000 per year. Equipment is depreciated linearly to zero book value over the life of the project. The equipment will sell for an estimated $30,000 at the end of the project. The tax rate is 34 percent. The project will require $31,000 extra inventory for spares and accessories. Should this project be implemented if Superior Manufacturing requires an 8 percent rate of return? Why or why not?

Answer rating: 100% (QA)

To determine whether the project should be implemented or not we need to calculate the projects net ... View the full answer