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A&E is considering increasing the size of a warehouse. The cost of the expansion is $825,000 and the increase in inventories and accounts payable will
A&E is considering increasing the size of a warehouse. The cost of the expansion is $825,000 and the increase in inventories and accounts payable will be $410,000 and $360,000 respectively. G expects that the expansion will increase net cash flows by $150,000 a year for the next 5 years and $200,000 a year for years 6-12. G has a 14% cost of capital and a marginal tax rate of 35%. What is the NPV and IRR of the warehouse expansion? What do you recommend?
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