You are a financial analyst for a company that is considering a new project. If the project is accepted, it will use 40% of a storage facility that the company already owns but currently does not use fully. The project is expected to last 10 years, and the discount rate is 10%. You research the possibilities and find that the entire storage facility can be sold for $100,000 and a smaller facility acquired for $ 40,000. The book value of the existing facility is $60,000, and both the existing and the new facilities (if it is acquired) would be depreciated straight line over 10 years. The ordinary tax rate is 40%, and the capital gains rate is 25%. What is the opportunity cost, if any, of using the storage capacity?
You are a financial analyst for a company that is considering a new project. If the project is accepted, it will use 40% of a storage facility that the company already owns but currently does not use fully. The project is expected to last 10 years, and the discount rate is 10%. You research the possibilities and find that the entire storage facility can be sold for $100,000 and a smaller facility acquired for $ 40,000. The book value of the existing facility is $60,000, and both the existing and the new facilities (if it is acquired) would be
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