Q: UnUnited Pigpen $($UP$)$ is considering a proposal to manufacture high protein hog feed. The project would make use of an existing

warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is $$260,000,$

and thereafter the rent is expected to grow in line with inflation at $4\%$ a year. In addition to using the warehouse, the proposal

envisages an investment in plant and equipment of $$3\mathrm{.}1$ million. This could be depreciated for tax purposes over $10$ years.

However, UP expects to terminate the project at the end of eight years and to resell the plant and equipment in year $8$ for

$$1,040,000.$ Finally, the project requires an initial investment in working capital of $$910,000.$ Thereafter, working capital is

forecasted to be $10\%$ of sales in each of years $1$ through $7.$ Year $1$ sales of hog feed are expected to be $$10\mathrm{.}9$ million, and

thereafter sales are forecasted to grow by $5\%$ a year, slightly faster than the inflation rate. Manufacturing costs are expected to

be $90\%$ of sales, and profits are subject to tax at $25\%.$ The cost of capital is $12\%.$ What is the NPV of UP's project?

Note: Do not round your intermediate calculations. Enter your answer in thousands rounded to $1$ decimal place.ited Pigpen $($UP$)$ is considering a proposal to manufacture high protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is $$260,000,$ and thereafter the rent is expected to grow in line with inflation at $4\%$ a year. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $$3\mathrm{.}1$ million. This could be depreciated for tax purposes over $10$ years.

However, UP expects to terminate the project at the end of eight years and to resell the plant and equipment in year $8$ for $$1,040,000.$ Finally, the project requires an initial investment in working capital of $$910,000.$ Thereafter, working capital is forecasted to be $10\%$ of sales in each of years $1$ through $7.$ Year $1$ sales of hog feed are expected to be $$10\mathrm{.}9$ million, and thereafter sales are forecasted to grow by $5\%$ a year, slightly faster than the inflation rate. Manufacturing costs are expected to be $90\%$ of sales, and profits are subject to tax at $25\%.$ The cost of capital is $12\%.$ What is the NPV of UP's project?

Note: Do not round your intermediate calculations. Enter your answer in thousands rounded to $1$ decimal place.