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 10%
Income tax rate 40%
Estimated useful life (in years) 5
Depreciation method for tax purposes Straight-line
Present value of ordinary annuity of one
at 10% for 5 periods 3.7908
Present value of one at 10% for 5 periods 0.6209
A) What is the NPV of the project?
B) Should the project be undertaken?