NPV; taxes; sensitivity analysis The owner of Midwest Grocer's Warehouse is considering a $$195,000$ installation of a new refrigerated storage room. The storage room has an expected life of $20$ years with no salvage value. The storage room is expected to generate net annual cash revenues $($before tax, labor, utility, and maintenance costs$)$ of $$46,000$ and would increase annual labor, utility, and maintenance costs by $$21,000.$ The firm's cost of capital is $9$ percent, and its tax rate is $30$ percent.

a$.$ Using straight$-$line depreciation, calculate the after$-$tax net present value of the storage room.

b$.$ Based on your answer to $($a$),$ is this investment financially acceptable? Explain.

c$.$ What is the minimum amount by which net annual cash revenues must increase to make this an acceptable investment?