G-III Apparel Is Considering Increasing the Size of a Warehouse

Multiple Choice

G-III Apparel is considering increasing the size of a warehouse. The cost of the expansion is $825,000, and the increase in inventories and accounts payable will be $410,000 and $360,000, respectively. G-III expects that the expansion will increase net cash flows by $150,000 a year for the next 5 years and $200,000 a year for years 6-12. G-III has a 14% cost of capital and a marginal tax rate of 35%. What is the NPV of the warehouse expansion?

A) -$3,450
B) $60,050
C) $10,050
D) -$338,570