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Recently, DB Miller amp; Co. implemented a positive NPV project. The project has a projected life of 4 years and an estimated rate of return of 14...
Recently, DB Miller & Co. implemented a positive NPV project. The project has a projected life of 4 years and an estimated rate of return of 14 percent. The project can be expanded by simply incurring additional variable costs or shut down without incurring any penalties or additional costs. Today, the government ruled that projects of this kind are now subject to a new per unit tax, the total cost of which will exceed the projected NPV. The most logical move for the company would be to
A. continue the project as planned since since the NPV was positive and the project has been implemented.
B. suspend the project until the following year to allow the company time to absorb the additional cost.
C. double the size of the project as soon as it is feasible to do so.
D. end the project immediately unless the additional tax can be passed on to Miller & Co. customers.
E. decrease the required return on the project so the NPV can remain positive give the additional cost.
