Paye’s Panes manufactures insulated windowpanes. The company’s CFO has asked you to assess a new manufacturing plant she is considering. The initial cost will be $475,000. While for tax purposes the plant can be depreciated straight-line to zero book value over 10 years, the CFO expects that the firm will sell the plant at the end of Year 5. At that time, the CFO estimates that there is a 20 percent chance that the plant can be sold for $80,000, a 30 percent chance it can be sold for $70,000, and a 50 percent chance that it can be sold for $25,000. The initial investment in working capital of $30,000 will be recovered when the machine is sold. Additional revenues from the plant are expected to be $205,000 per year, and additional operating costs will be $73,000 per year. The firm has a marginal tax rate of 23 percent and a 9 percent cost of capital.

(a) What is the NPV of the new plant?

(b) You complete your analysis and read in the Wall Street Journal that a new process for making insulated window will be available five years from today.

You believe that this will lower the Year 5 sales price of the plant dramatically. To the nearest dollar, what is the lowest amount that you can sell the plant for and still recommend to your CFO that she undertake the investment?