You have an opportunity to invest in a concession at a world exposition. LOS To use the building and exhibits more fully, the venture is expected to cover a six-year period consisting of a preliminary year, the two years of formal exposition, and a three-year period of reduced operation as a regional exposition. The terms of the concession agreement specify the following:

1.At inception, a \($60,000\) deposit is paid to Global Expo, Inc., the promoting organization. This amount is returned in full at the end of the six years if the operator maintains the concession in order and keeps it open during scheduled hours. The deposit is not tax deductible, nor is its return subject to income taxes.

2.The operator must install certain fixtures that will cost \($240,000.\) The fixtures become the property of Global Expo, Inc., at the end of the six years.

After careful investigation and consultation with local experts, you conclude that the following schedule reflects the estimated pre-tax income of the concession (amounts in thousands of dollars):

Required
Assuming an income tax rate of 40% and a desired annual return of 9%, what is the net present value of this investment opportunity? What is the maximum amount that could be invested and still earning a 9% annual return? (Round amounts to the nearest dollar.)

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Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Sales (all cash). $150 $435 $488 $300 $240 $180 Operating expenses: Cash... $ 75 $228 $279 $170 $140 $106 Tax depreciation. 48 77 46 28 28 13 Total expenses $123 $305 $325 $198 $168 $119 Pre-tax income... $ 27 $130 $163 $102 $ 72 $ 61