Development Company is considering investment project requiring 1.5 million in equipment and additional installation costs of 30,000 and 50,000 in fixtures. Incremental operating income for this project is expected to be 455,000 for 4 years and 475,000 for another 3 years. At the end of seven years the equipment will be sold for 155,000. Before investing they were renting the unused building for 60,000 a year. The CCA tax rate on fixtures and equipment is 30%. Company tax rate is 40% and its cost of capital is 12%. Should Company proceed with the new project.
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