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Initial cost of building and equipment is $15million Expected to have a useful life of 30 years At the end of the project the building
- Initial cost of building and equipment is $15million
- Expected to have a useful life of 30 years
- At the end of the project the building and its equipment are expected to be sold for a $5,000,000 salvage value
- The building and its equipment will be depreciated over their 30-year life using straight-line depreciation to a zero balance
- The building is to be constructed on land leased for $300,000 per year
- Net working capital must be increased by $250,000
- This amount would be recovered at the end of the 30-year life.
- Annual revenues from the new office will be $2,400,000
- Of this $2,400,000 in revenues, $500,000 will be drawn away from the firm's main office
- The new office will incur about $1,000,000 per year in other expenses
- Both expenses and revenues are expected to remain approximately constant over the new office's 30-year life
- Marginal tax rate is 30%
- Cost of capital 15%
Calculate NPV, IRR, and PI of the project
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