BNT Transportation is considering building a new facility to manufacture tugboats. If BNT

builds the new plant, it will partially replace an existing plant that some in BNT

management argue is inefficient. The new facility would require an initial capital

expenditure of $$12$ million today. This cost would be depreciated on a straight$-$line basis

over the forecasted $15-$year lifetime of the plant to a final book value of $$0.$ The facility

would be built on land that BNT already owns. BNT real estate professionals estimate that

if the new facility is not built, the land could be sold immediately for $$3\mathrm{.}5$ million. After $15$

years, BNT estimates that the facility, including the land, could be sold for $$4\mathrm{.}0$ Million.

Sale of the facility $($including the land$)$ at that point would generate require the assistance

of a business broker whose fee is expected to be $20\%$ of the total market value.

BNT anticipates that output from this plant will produce revenues of $$8$ million per year in

the first year. Direct expenses $($raw materials, labor and direct overhead$)$ not including

depreciation are forecasted to be $$0\mathrm{.}75$ of every dollar of sales. Growth in both revenues

and expenses is forecast to be $1\%$ per year for the next $15$ years, after which the plant will

be of no use and produce no revenues or expenses. The new facility would reduce

Earnings Before Interest and Taxes $($EBIT$)$ at the existing plant by $$500,000$ per year. The

foregone EBIT was expected to grow at $1\%$ per year. BNT$$s corporate office also charges

each plant $$0\mathrm{.}10$ on every dollar of revenue in order to cover the costs associated with the

corporate office. Total costs at corporate are not expected to change. The appropriate

discount rate for BNT$$s Free Cash Flow $($FCF$)$ is estimated to be $8\%.$

a$.$ What is the NPV of the new facility?

b$.$ Should BNT build the new facility? Why or why not?