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

question 30

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:

Two-switch AND Gate

A basic digital logic gate that outputs a high signal or true only if both input signals are high or true.

Output

The result or product of a system's process, typically referring to power, data, or material produced by a system or device.

Light Emitting Diode

A semiconductor device that emits light when electric current flows through it, commonly used for indicators, displays, and lighting.

Digital Display

An electronic screen or panel that shows information in visual form through digits, often found in devices like clocks, meters, and dashboards.