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A company is considering a 4-year project with an initial cost of $1,350,000. The project will not directly produce any sales but will reduce operating
A company is considering a 4-year project with an initial cost of $1,350,000. The project will not directly produce any sales but will reduce operating costs by $843,000 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 $50,000. The tax rate is 40 percent. The project will require $26,000 in extra inventory for spare parts and accessories. Should this project be implemented if the company's requires a rate of return of 40 percent? Why or why not
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