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Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project.  -At the end of the project the equipment will be sold for an estimated $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. -The tax rate is 35 percent. The project will require $45,000 of inventory which will be recovered when the project ends. -Should this project be accepted if the firm requires a 14 percent rate of return? Why or why not?

Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project.  -At the end of the project the equipment will be sold for an estimated $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. -The tax rate is 35 percent. The project will require $45,000 of inventory which will be recovered when the project ends. -Should this project be accepted if the firm requires a 14 percent rate of return? Why or why not?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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-Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. 

-At the end of the project the equipment will be sold for an estimated $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year.

-The tax rate is 35 percent. The project will require $45,000 of inventory which will be recovered when the project ends.

-Should this project be accepted if the firm requires a 14 percent rate of return? Why or why not? 

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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