Question

7.25 Agdist Corporation distributes agricultural equipment. The board of directors is
considering a proposal to establish a facility to manufacture an electronically controlled
“intelligent” crop sprayer invented by a professor at a local university. This
crop sprayer project would require an investment of $10 million in assets and
would produce an annual after-tax net benefit of $1.8 million over a service life of
eight years. All costs and benefits are included in these figures. When the project
terminates, the net proceeds from the sale of the assets will be $1 million. Compute
the rate of return of this project. Is this a good project at MARR = 10%?

Answer 1