Question regarding the npv of the expansion project

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Express Shopping Centres Inc. is considering expanding into the vacant land next door. This would require an outlay of $7.38 million. It is forecast that the additional complex will generate earnings before tax of $960,000 next year and that these earnings would grow at a rate of 4% per annum into the foreseeable future. Express pays company tax at a rate of 30% and has a real cost of capital of 8.5%. The Reserve Bank of Australia has forecast inflation to be 2.5% over the foreseeable future. What is the NPV of the expansion project?

  1. $1,937,157.71
  2. $2,220,000.00
  3. $3,650,482.00
  4. $5,930,225.30
  5. $7,553,333.33

Reference no: EM131090144

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