Piscataway Industries is deciding whether to invest in Rahway Engineering's new manufacturing technology (the asset) to reduce the cost of manufacturing high performance valves for the chemical industry. Spending to purchase and install this technology is $350,000.
Estimated cost savings from manufacturing:
Piscataway's Chief Financial Officer has determined the desired rate of return for the project is 8.5%.
●What factors should the CFO have considered in selecting the desired rate of return?
●Should Piscataway make this investment? Why or why not?