The following data are related to the construction of a warehouse by a retail store.

Cost of land $ $300,000$

Cost of building warehouse $1,000,000$

Increase in inventories $150,000$

Increase in accounts receivable $40,000$

Annual cash inflow from additional sales $200,000$

Annual reduction in inventory storage costs $300,000$

Annual additions to other costs of operations $80,000$

Estimated life of warehouse $10$ years

Estimated salvage value of warehouse at end of $10$ years $100,000$

Depreciation method Straight$-$line

Estimated value of land at the end of $10$ years $300,000$

Tax rate $40\%$

Required rate of return $12\%$

Required:

Compute the cash flows associated with this investment, i$.$e$.$ the initial cash flow, the annual cash flows and the terminal cash flow.

Compute the payback period and the net present value. Should the company build the warehouse