Interrelated investment decisions. The Whitley Company is considering building a shopping mall at a cost of $8 million. If it builds the mall, it can expect to receive after-tax operating cash flows (including the effects of depreciation) of 1.5 million per year over the next 15 years. The company is also considering locating a department store in the mall. To open the store the firm must make an additional $1.2 million investment, but after-tax operating cash flows (including the effects of depreciation) are both price and unit operating cost to increase by 4 percent per year, the same rate as expected inflation over the next three years, what is the NPV of the decision to buy new equipment? (Assume that inflation will increase price and operating expenses by 4 percent in each year, including the first year and that the expected inflation rate is already incorporated into the firm's nominal cost of capital.) Inflation adjustments. The Laer Corporation is inflation Adjustments. The Hyland Company is considering buying new equipment at a cost of $450,000. The new equipment will be depreciated on a straight-line basis over three years to a zero salvage value. The new equipment will allow the firm to increase production and sales by 14,000 units per year in each of the next three years. The firm sells its product for $25 per unit and incurs operating expenses of $90 per unit. The firm's tax rate is 40 percent and its nominal cost of capital is 15 percent. If the firm expects The division manager says: "The accounting department gave me a cost of capital in real terms to use for capital budgeting decisions. Therefore, I will increase revenues and costs by the rate of expected inflation so that the NPV I calculate will incorporate the effects of inflation. The sales manager says: "I was asked to do my capital budgeting analysis in real terms. I have adjusted the revenues and operating expenses to remove the effects of inflation. Interrelated investment decisions. The Whitley Company is considering building a shopping mall at a cost of $8 million. If it builds the mall, it can expect to receive after-tax operating cash flows (including the effects of depreciation) of 1.5 million per year over the next 15 years. The company is also considering locating a department store in the mall. To open the store the firm must make an additional $1.2 million investment, but after-tax operating cash flows (including the effects of depreciation) are both price and unit operating cost to increase by 4 percent per year, the same rate as expected inflation over the next three years, what is the NPV of the decision to buy new equipment? (Assume that inflation will increase price and operating expenses by 4 percent in each year, including the first year and that the expected inflation rate is already incorporated into the firm's nominal cost of capital.) Inflation adjustments. The Laer Corporation is inflation Adjustments. The Hyland Company is considering buying new equipment at a cost of $450,000. The new equipment will be depreciated on a straight-line basis over three years to a zero salvage value. The new equipment will allow the firm to increase production and sales by 14,000 units per year in each of the next three years. The firm sells its product for $25 per unit and incurs operating expenses of $90 per unit. The firm's tax rate is 40 percent and its nominal cost of capital is 15 percent. If the firm expects The division manager says: "The accounting department gave me a cost of capital in real terms to use for capital budgeting decisions. Therefore, I will increase revenues and costs by the rate of expected inflation so that the NPV I calculate will incorporate the effects of inflation. The sales manager says: "I was asked to do my capital budgeting analysis in real terms. I have adjusted the revenues and operating expenses to remove the effects of inflation