Five years ago they purchased 4 new barges for $2m each which they are able to depreciate for tax purposes at 10% per annum straight line. At this time 4 barges were sold and four others had extensive renovations. This meant the renovated barges had a useful life of 8 years and a value for taxation depreciation purposes of $400,000. They are able to be depreciated for tax purposes for 8 years straight line. Dana thought it was interesting and helpful that the taxation depreciation was at the same rate as the accounting depreciation.

If the expected project goes ahead these new and renovated barges, purchased five years ago, can be sold in period 0 for 20% of their original cost.

For taxation purposes the full amounts of the tax base are depreciated with no allowance for residual value.

The new barges purchased five years ago are expected to have a salvage value of $100,000 each at the end of their 10 year useful life and the renovated barges a salvage value of $50,000 each at the end of their 8 year useful life. They will only really be able to be scrapped at this time.

In recent times there has been a move away from the use of petrol in nautical vessels with most using light diesel. Due to the failure of a competitor there is also the opportunity to now supply heavy diesel to the fleet of cruise liners that regularly visit Sydney harbour. They would not have to tender for this work as they have been offered the contract, as they are the only fuel barge company still in operation on Sydney harbour.

The current tax rate is 30%.

what should the company do the have a maximum NPV?