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Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at $40 each. Variable cost per detector will be $30 and fixed
Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at $40 each. Variable cost per detector will be $30 and fixed cost is expected to be $40,000 pa. The equipment will cost $175,000 which will be depreciated straight-line to zero over the five-year life of the project. At the end of the project it is expected to be sold for $15,000. If tax rate is 30% and the required rate of return is 12%, should the company accept the project?
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