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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Net Present Value Analysis and Qualitative Factors, Alternative Format. Pete’s Plumbing Supplies would like to expand into a new warehouse at a cost of $500,000. The warehouse is expected to have a life of 20 years, and a salvage value of $100,000. Annual costs for maintenance, insurance, and other cash expenses will total $60,000. Annual net cash receipts resulting from this expansion are predicted to be $115,000. The company’s required rate of return is 12 percent.
Required:
a. Find the net present value of this investment using the format presented in . Round to the nearest dollar.
b. Should the company purchase the new warehouse? Explain.
c. Provide one qualitative factor that might cause the company to reach a different conclusion than the one reached in requirement b.
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