Question
Deli Lines is considering a project with an initial fixed asset cost of $2,600,000 which will be depreciated straight-line to a zero book value over
Deli Lines is considering a project with an initial fixed asset cost of $2,600,000 which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $250,000. The project will not directly produce any sales but will reduce operating costs by $738,000 a year. The tax rate is 35 percent. The project will require $45,000 of inventory which will be recouped when the project ends. Should this project be implemented if the firm requires a 14 percent rate of return? Why or why not?
Group of answer choices No; The NPV is -$172,937.49. No; The NPV is -$87,820.48. Yes; The NPV is $251,860.34. Yes; The NPV is $387,809.04. Yes; The NPV is $466,940.57.
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