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Assess a project which would realize the following cost savings each year over the next 5 years. Yr1-$82,000, Yr2-$82,000, Yr3-$64,000, Yr4-$53,000 and Yr5-$37,000. The company
Assess a project which would realize the following cost savings each year over the next 5 years. Yr1-$82,000, Yr2-$82,000, Yr3-$64,000, Yr4-$53,000 and Yr5-$37,000. The company has hired a consultant at $22,000 to implement this project, and it will cost $185,000 to purchase this equipment today, which will not have any salvage value at the end of five years.
Other important information CCA rate is 30%, Companys Cost of Capital is 15% and the Tax Rate is 35%. There are no Working Capital requirements for this project.
Bill was asked to calculate the NPV of this project and make a recommendation as to if the company should proceed with it. What does the NPV seek to illustrate to the companys management team?
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Intermediate Financial Management
Authors: Eugene F Brigham, Phillip R Daves
9th Edition
032431986X, 9780324319866
