Thornley Machines Is Considering a 3-Year Project with an Initial

question 55

Multiple Choice

Thornley Machines is considering a 3-year project with an initial cost of €618,000.The project will not directly produce any sales but will reduce operating costs by €265,000 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 €60,000.The tax rate is 34%.The project will require
€23,000 in extra inventory for spare parts and accessories.Should this project be implemented if
Thornley's requires a 9% rate of return? Why or why not?

• A)No; The NPV is -€2,646.00.
• B)Yes; The NPV is €27,354.00.
• C)Yes; The NPV is €32,593.78.
• D)Yes; The NPV is €43,106.54.
• E)Yes; The NPV is €196,884.40.

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Definitions:

ATP Synthase Complex

An enzyme complex that synthesizes ATP from ADP and inorganic phosphate during cellular respiration and photosynthesis.

Cristae

The folds of the inner membrane of a mitochondrion that are involved in the electron transport chain of aerobic respiration, increasing the surface area for ATP production.

Mitochondria

Mitochondria are membrane-bound cell organelles responsible for generating most of the chemical energy needed to power the cell's biochemical reactions.

Plasma Membrane

The lipid bilayer that encloses the cytoplasm of a cell, regulating the passage of substances in and out of the cell.