A Project Requires an Initial Investment of $100,000 and Installation Cost

A project requires an initial investment of $100,000 and installation Cost for $5 Only

Initial Investment

A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years.. The company will pay insurance expense of $5,000 per year beginning with the installation of the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a rate of 20% and the opportunity cost of capital is 20%, is the project attractive to the company?

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