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Adams Enterprises, Inc. is considering the purchase of a new manufacturing facility for $110m. The facility is expected to be in operations for seven years,

Adams Enterprises, Inc. is considering the purchase of a new manufacturing facility for $110m. The facility is expected to be in operations for seven years, after which it will be shut down. The facility will be fully depreciated on a straight-line basis over seven years, and it will have no resale value. Revenues from the facility are expected to be $50m at the end of the first year, and are expected to increase at the rate of 5 percent per year. Production costs at the end of the first year will be $20m and they are expected to increase at 7% per year. The discount rate is 14%. Adams, Inc. has other ongoing, profitable operations, and it will be fully taxable for the profits generated by the new production facility. The corporate tax rate is 34%. Should the company accept the project?

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