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1) Gateway Communications is considering the project with the initial fixed asset cost of= $2.46 million that will be declined straight-line to a zero book value over 10-year life of project. At the ending of project equipment will be sold for the estimated= $300,000. Project will not directly produce any sales but will decrease operating costs by= $725,000 a year. Tax rate is 35%. The project will need= $45,000 of inventory that will be recouped when project ends. Must this project be executed if firm needs a 14% rate of return? describe why or why not?

a) Yes; The NPV is $387,516.67
b) No; The NPV is -$87,820.48.
c) Yes; The NPV is $466,940.57
d) Yes; The NPV is $251,860.34
e) No; The NPV is -$172,937.49

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915313

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