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

question 9

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:

Hemicellulose

A polysaccharide found in plant cell walls alongside cellulose, providing structural support.

Cellulose

A complex carbohydrate composed of glucose units that form the main constituent of the cell wall in most plants, providing structural support.

Soluble

Capable of being dissolved in a solvent, typically water, to form a solution.

Apoptosis

A programmed cell death process that enables organisms to control cell growth and eliminate cells that are damaged or no longer needed.