Sensitivity analysis: Home Garden Inc.

Home Garden Inc. is considering the construction of a distribution warehouse in West Virginia to service its east coast stores based on the following estimates:

Construction cost of warehouse

Residual value

Useful life

$$20,000,000$ to $$25,000,000$

$$3,000,000$

$25$ years

Estimated annual net cost savings

$$2,500,000$ to $$4,000,000$

Net present value $ $$ required, use the minus sign to indicate a negative net present value.

Net present value : $$