(NPV; taxes) The manager of Bayou Cold Storage is considering the installation of a new refrigerated storage room. She has learned that the installation would require an initial cash outlay of $520,000. The installation would have an ex¬ pected life of 20 years with no salvage value. The installation would increase annual labor and maintenance costs by $37,000. The firm’s cost of capital is estimated to be 9 percent, and its tax rate is 30 percent. The storage room is expected to generate net annual cash revenues (before tax, labor, and mainte¬ nance costs) of $85,000.

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

b. Based on your answer to part

a, is this investment financially acceptable? Explain?