a. Lewisville Company is currently leasing the warehouse to another company for $5,100 per month on a year-to-year basis. (Hint. Use the PV function in Excel to calculate, on an after-tax basis, the PV of this stream of monthly rental receipts.) b. The warehouse's estimated sales value is $202.000. A commercial realtor believes that the price is likely to remain unchanged in the near future. The building originally cost $60,500 and is being depreciated at $1,550 annually. Its current net book vallie (NBV) is $7,550. c. Lewisville Company is seriously considering converting the warehouse into a factory outlet for furniture. The remodeling will cost $105.000 and will be modest because the major attraction will be rock-bottom prices. The remodeling cost will be depreciated over the next 5 years Lising the double-cleclining-balance method. (Note: Use the VDB function in Excel to calculate depreciation charges. The advantage of using the VDB, rather than the DDB, function is that there is a (default) option in the former that provides an automatic switch to the straight-line method when it is advantageous to do so.) d. The inventory and receivables (net of current liabilities) needed to open and sustain the factory outlet would be $610.000. This total is fully recoverable whenever operations terminate. e. Lou is fairly certain that the warehouse will be condemned in 10 years to make room for a new highway. The firm most likely would receive $205.000 from the condemnation. f. Estimated annual operating data, exclusive of depreciation, are as follows: Sa.es (cash City ApS 390,000 $505,000 g. Nonrecurring sales promotion costs at the beginning of year 1(i.e., time 0) are expected to be $102,000. These costs are fully deductible for tax purposes.) h. Nonrecurring termination costs at the end of year 5 are $51,000. (These costs are fully deductible for tax purposes.) 1. The after-tax discount rate for capital budgeting purposes is 10%. (To calculate the present value factor for each year, 1, 1 = 1, 5, Lise the following formula: PV factor; = (1 = 1.10). The company is in the 40% tax bracket (federal and state combined). Cash Flows in Year 2 3 PV 0 1 4 5 Description After-tax monthly rent foregone All are irrelevant Remodeling cost (capitalized) Depreciation tax savings DDB rrethad; @40%) Investment in net working capital Recovery of net working capital After-tax cash sales After-tax cash operating experises After-tax sales promotion cost, year 0 Afler-lax termination cost, year 5 NPV = a. Lewisville Company is currently leasing the warehouse to another company for $5,100 per month on a year-to-year basis. (Hint. Use the PV function in Excel to calculate, on an after-tax basis, the PV of this stream of monthly rental receipts.) b. The warehouse's estimated sales value is $202.000. A commercial realtor believes that the price is likely to remain unchanged in the near future. The building originally cost $60,500 and is being depreciated at $1,550 annually. Its current net book vallie (NBV) is $7,550. c. Lewisville Company is seriously considering converting the warehouse into a factory outlet for furniture. The remodeling will cost $105.000 and will be modest because the major attraction will be rock-bottom prices. The remodeling cost will be depreciated over the next 5 years Lising the double-cleclining-balance method. (Note: Use the VDB function in Excel to calculate depreciation charges. The advantage of using the VDB, rather than the DDB, function is that there is a (default) option in the former that provides an automatic switch to the straight-line method when it is advantageous to do so.) d. The inventory and receivables (net of current liabilities) needed to open and sustain the factory outlet would be $610.000. This total is fully recoverable whenever operations terminate. e. Lou is fairly certain that the warehouse will be condemned in 10 years to make room for a new highway. The firm most likely would receive $205.000 from the condemnation. f. Estimated annual operating data, exclusive of depreciation, are as follows: Sa.es (cash City ApS 390,000 $505,000 g. Nonrecurring sales promotion costs at the beginning of year 1(i.e., time 0) are expected to be $102,000. These costs are fully deductible for tax purposes.) h. Nonrecurring termination costs at the end of year 5 are $51,000. (These costs are fully deductible for tax purposes.) 1. The after-tax discount rate for capital budgeting purposes is 10%. (To calculate the present value factor for each year, 1, 1 = 1, 5, Lise the following formula: PV factor; = (1 = 1.10). The company is in the 40% tax bracket (federal and state combined). Cash Flows in Year 2 3 PV 0 1 4 5 Description After-tax monthly rent foregone All are irrelevant Remodeling cost (capitalized) Depreciation tax savings DDB rrethad; @40%) Investment in net working capital Recovery of net working capital After-tax cash sales After-tax cash operating experises After-tax sales promotion cost, year 0 Afler-lax termination cost, year 5 NPV =