Question $4$

The Nook Caf$$ is thinking about expanding to a location inside the Bauer School of Business.

They have the option to sign a $5-$year lease and pay $$45,000$ per year for the space.

To get started, they will need to invest in some equipment worth $$25,000($espresso machine,

refrigerator, cash register, etc$).$ They expect to depreciate these machines on a straight$-$line

basis over $10$ years. They believe they can sell the machines for $$11,000$ after $5$ years.

Additionally, they will need $$5,000$ for inventory and other working capital needs.

They believe their yearly sales will start at $$115,000.$ They will need to hire a few student

employees for a total of $$80,000$ each year.

They think their sales will grow by $10\%$ per year. Their working capital will rise slightly at $4\%$

per year. Finally, their employee wages will grow at $5\%$ per year.

If the tax rate is $19\%$ and their discount rate is $9\mathrm{.}2\%,$ what is the NPV of this project? Assume

the project ends after the lease in year $5.($Answer in $dollars, not $thousands.$)$