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Superior Manufacturers is considering a 3year project with an initial cost of 846000 The project will not directly produce any sales but will reduce operating costs by 295000 a year The

Superior Manufacturers is considering a 3-year project with an initial cost of $846,000. The project will not directly produce any sales but will reduce operating costs by $295,000 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 $30,000. The tax rate is 34 percent. The project will require $31,000 in extra inventory for spare parts and accessories. Should this project be implemented if Superior Manufacturing requires an 8 percent rate of return? Why or why not? According to my professor the correct answer is No, The NPV is -87,820.48.

 

Aug 17 2020 View more View Less

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