Please please help!! Logan, Inc. is considering the purchase of a warehouse dire

ID: 2595159 • Letter: P

Question

Please please help!!

Logan, Inc. is considering the purchase of a warehouse directly across the street from its manufacturing plant. Logan currently warehouses its inventory in a public warehouse across town. Rent on the warehouse and delivering and picking up inventory cost Logan $48,000 per year. The building will cost Logan 450,000. Logan will depreciate the building for 20 years. At the end of 20 years, the building will have a $125,000 salvage value. Logan's required rate of return is 10%. The building's net present value is $960,000 $427,228 O ($22,772) O ($41,347

Explanation / Answer

Answer:

Building net prasent value =($22,772)

Working notes fo r the answer:

Year

Cash
flow

PV factor
at 10%

Prasent
value

1 to 20

48,000.00

8.5136

408652.8

20th year

125,000

0.1486

18575

Less:

427227.8

Initial Investment

-450,000

NPV

-22,772