Dainty Cone is trying to decide whether to refurbish its current building or build a new one. If the company uses a discount rate of 8%, what would Dainty Cone do using NPV? How much is the NPV of the better choice?

Build a new building:

Costs $500,000 and has an estimated value of $50,000 in 10 years.

Will need to be painted again after 7 years at a cost of $40,000.

Will generate $200,000 in revenues and $65,000 in expenses each year.

Refurbish the old building:

Has a current value of $50,000.

Would cost $200,000 to remodel and has an estimated salvage value of $0 in 10 years.

Will need to be painted again after 7 years at a cost of $40,000.

Will generate $175,000 in revenues and $75,000 in expenses each year.

		New Building $455,680
		Refurbish Old Building $455,680
		Refurbish Old Building $447,680
		New Building $447,680