NPV and abandonment, The owners of Egg Sauce, Ltd. are

NPV and abandonment

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Reference no: EM131506456

(NPV and abandonment)

The owners of Egg Sauce, Ltd. are tired of their business. In fact, they are so exhausted that they are considering abandoning the business. The building and land could be sold for $700,000 and would provide an after-tax amount of $640,000. The equipment could be sold at auction for about $55,000 and, at that price, they could clain a tax credit of $5,000. The building needs renovation about every 10 years. The before-tax EAC of this periodic maintenance is $40,000, and the after-tax EAC, including the effect of depreciation, is $30,000. the annual revenues minus expenses (including all employee costs) from running Egg Sauce are $200,000 per year, and the firm pays taxes at the rate of 35% on this amount, The investment's cost of capital is 15%. What is the NPV from abandoning Egg Sauce?

Possible answers:

-$200,000

-$175,000

-$150,000

-$100,000

-$75,333

-$33,333

$33,333

$73,333

$120,000

$150,000

$175,000

$200,000

Please show all work.

Reference no: EM131506456

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