Reference no: EM132661689

Initial cost of building and equipment is $15 million

• Expected to have a useful life of 30 years
• At the end of the project the building and its equipment are expected to be sold for a $5,000,000 salvage value
• The building and its equipment will be depreciated over their 30-year life using straight-line depreciation to a zero balance
• The building is to be constructed on land leased for $300,000 per year
• Net working capital must be increased by $250,000
• This amount would be recovered at the end of the 30-year life.
• Annual revenues from the new office will be $2,400,000
• Of this $2,400,000 in revenues, $500,000 will be drawn away from the firm's main office
• The new office will incur about $1,000,000 per year in other expenses
• Both expenses and revenues are expected to remain approximately constant over the new office's 30-year life
• Marginal tax rate is 30%
• Cost of capital 15%

Calculate NPV, IRR, and PI of the project