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A Canadian e-commerce start-up venture, DirectToYou.ca, has purchased a warehousing facility for $10 000 000. DirectToYou.ca is currently not profitable and expects not to make
A Canadian e-commerce start-up venture, DirectToYou.ca, has purchased a warehousing facility for $10 000 000. DirectToYou.ca is currently not profitable and expects not to make a profit for the next two years after which it predicts that it will be very profitable. What is the after-tax present value cost of this warehouse? The CCA rate for buildings is 5% and DirectToYou.ca expects to pay tax at a rate of 30%. Its after-tax cost of capital MARR is 12%. (Assume that DirectToYou.ca will own the warehouse for a very long time.) [5]
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