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A building company plans to build a new warehouse. The cost of building the warehouse is an initial investment of 750 thousand dollars, together with
A building company plans to build a new warehouse. The cost of building the warehouse is an initial investment of 750 thousand dollars, together with a further 100 thousand dollars at the end of each of the next two quarters. The building company will need to cover quarterly operating cost of 50 thousand dollars at the end of each of the next two quarters(first and second). After completion of the construction by the end of the second quarter, the warehouse will be sold for 1.2 million dollars. Assume that the annual interest rate is 6% compounded annually, find (keeping all results with three decimal places): (1) the present value of the building costs; (2) the present value of the operating costs; (3) the present value of the revenue; and (4) the internal rate of return of the project. (5) Do you think the company should go carry out this project? Give your reason(s). A building company plans to build a new warehouse. The cost of building the warehouse is an initial investment of 750 thousand dollars, together with a further 100 thousand dollars at the end of each of the next two quarters. The building company will need to cover quarterly operating cost of 50 thousand dollars at the end of each of the next two quarters(first and second). After completion of the construction by the end of the second quarter, the warehouse will be sold for 1.2 million dollars. Assume that the annual interest rate is 6% compounded annually, find (keeping all results with three decimal places): (1) the present value of the building costs; (2) the present value of the operating costs; (3) the present value of the revenue; and (4) the internal rate of return of the project. (5) Do you think the company should go carry out this project? Give your reason(s)
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