HBC Corp. a maker of sheet rock products, is considering adding a new sheetrock facility. The new facility would be housed in an unused building that the firm bought 8 years ago for $5 million; the building is being depreciated over a 20 life to a salvage value of zero. The building can be sold today for $2 million, and the market value of the building is expected to increase at 5% per year going forward. The new facility would require the purchase of $50 million of equipment that would be depreciated straight line to zero over a useful life of 5 years. However, the firm expects this equipment would have a scrap value of $250,000 at the end of its 5-year life. The new facility would add $20 million to annual revenues, which are currently $100 million per year. The higher manufacturing efficiency of the new facility would reduce annual operating costs from 40% of revenues to 35% for both existing and new sales revenues. The new facility would require a $500,000 increase in inventories and create a $100,000 increase in accounts payable, which would be reversed at the end of the project. The firms tax rate is 20% and the required rate of return is 8%.

What are the incremental annual revenues that this project would yield?

What are the incremental annual costs (excluding depreciation) that this project would entail?