Century Roofing Is Thinking of Opening a New Warehouse, and the Key

Multiple Choice

Century Roofing is thinking of opening a new warehouse, and the key data are shown below.The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new warehouse.The equipment for the project would be depreciated by the straight-line method over the project's 3-year life, after which it would be worth nothing and thus it would have a zero salvage value.No new working capital would be required, and revenues and other operating costs would be constant over the project's 3-year life.What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) $\begin{array}{lr}\text { Project cost of capital (r) } & 10.0 \% \\\text { Opportunity cost } & \$ 100,000 \\\text { Net equipment cost (depreciable basis) } & \$ 65,000 \\\text { Straight-line deprec. rate for equipment } & 33.333 \% \\\text { Sal es revenues, each year } & \$ 123,000 \\\text { Operating costs (excl. deprec.) , each year } & \$ 25,000 \\\text { Tax rate } & 25 \%\end{array}$

A) $26,796
B) $28,207
C) $29,691
D) $31,254
E) $32,817