Problem 3 (MS Excel Required) You need to know whether the building of a new warehouse is justified under the following conditions. The proposal is for a warehouse costing $250,000. The warehouse has an expected useful life of 35 years and a net salvage value (net proceeds from sale after tax adjustments) of $50,000. Annual receipts of $67,000 are expected, annual maintenance and administrative costs will be $12,000/year, and annual income taxes are $15,000. a. Is the proposal justified for an i = 15%? b. What is the NPV of the proposal if i = 20%? C. What is the maximum interest rate that makes this proposal acceptable?
Problem 3 (MS Excel Required) You need to know whether the building of a new warehouse is justified under the following conditions. The proposal is for a warehouse costing $250,000. The warehouse has an expected useful life of 35 years and a net salvage value (net proceeds from sale after tax adjustments) of $50,000. Annual receipts of $67,000 are expected, annual maintenance and administrative costs will be $12,000/year, and annual income taxes are $15,000. a. Is the proposal justified for an i = 15%? b. What is the NPV of the proposal if i = 20%? C. What is the maximum interest rate that makes this proposal acceptable?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Problem 3 (MS Excel Required)
You need to know whether the building of a new warehouse is justified under the following conditions.
The proposal is for a warehouse costing $250,000.
The warehouse has an expected useful life of 35 years and a net salvage value (net proceeds from sale after
tax adjustments) of $50,000.
Annual receipts of $67,000 are expected, annual maintenance and administrative costs will be $12,000/year,
and annual income taxes are $15,000.
a.
Is the proposal justified for an i = 15%?
b. What is the NPV of the proposal if i = 20%?
C. What is the maximum interest rate that makes this proposal acceptable?
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