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Jennys Flower Shop decides they want to expand operations and is looking for a larger facility. She can either add an addition onto her current

Jennys Flower Shop decides they want to expand operations and is looking for a larger facility. She can either add an addition onto her current building or sell the building she currently owns and lease a facility down the street. Assume her cost of capital is 14% and her tax rate is 20%. Option #1: If Jenny adds onto her current building, she estimates it will cost her $150,000 today. She will depreciate the improvements using straight line depreciation, with an estimated 5 year life and no salvage value. She expects her estimated operating revenues (cash) to increase by $100,000 per year, with operating (cash) costs increasing by $20,000 each year. At the end of year 2, she also anticipates an additional maintenance charge (cash expense) to her current flower coolers of $25,000. At the end of 5 years, she plans to retire and sell the building for $600,000. Calculate the NPV, including tax effects.

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