Question - Stanley Company has obtained the following information about a proposed project:
Annual cash operating savings (excluding depreciation) for 5 years (end of year) $50,000
Depreciation expense per year for tax purposes $33,000
Estimated salvage value in 5 years $10,000
Cost of equipment $175,000
Required rate of return 11%
Estimated useful life (in years) 5
Depreciation method for tax purposes Straight-line Present value of ordinary annuity of one.
Required:
A) What is the NPV of the project?
B) Should the project be undertaken?