Nike is constructing a mall near industrial estate. The initial investment includes land costs $500,000, working capital $650,000, building costs $550,000 and other materials required costs $250,000. It is expected that the sales of the mall will reach up to $600,000 per year for 12 years at which time the land can be sold for $500,000, the building for $250,000, the materials for $60,000 and all the working capital will be recovered (Hint: Salvage values). The annual expenses for labor and other items will sum up to $435,000 per year. If the company requires an MARR of 9.5% on return, determine if it should invest in this mall? Use AW method to support your argument.
Nike is constructing a mall near industrial estate. The initial investment includes land costs $500,000, working capital $650,000, building costs $550,000 and other materials required costs $250,000. It is expected that the sales of the mall will reach up to $600,000 per year for 12 years at which time the land can be sold for $500,000, the building for $250,000, the materials for $60,000 and all the working capital will be recovered (Hint: Salvage values). The annual expenses for labor and other items will sum up to $435,000 per year. If the company requires an MARR of 9.5% on return, determine if it should invest in this mall? Use AW method to support your argument.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 04
Nike is constructing a mall near industrial estate. The initial investment includes land
costs $500,000, working capital $650,000, building costs $550,000 and other materials
required costs $250,000. It is expected that the sales of the mall will reach up to $600,000
per year for 12 years at which time the land can be sold for $500,000, the building for
$250,000, the materials for $60,000 and all the working capital will be recovered (Hint:
Salvage values). The annual expenses for labor and other items will sum up to $435,000
per year. If the company requires an MARR of 9.5% on return, determine if it should
invest in this mall? Use AW method to support your argument.
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