Bradley Company's required rate of return is 14%. The company has an opportunity to be the exclusive distributor of a popular consumer item. No new equipment would be needed, but the company would have to use one-fourth of the space in a warehouse it owns. The warehouse cost $200,000 new and is currently half-empty. There are no other plans to use the empty space. In addition, the company would have to invest $100,000 in working capital to carry inventories and accounts receivable for the new product line. The company would have the distributorship for only 5 years. The distributorship would generate a $17,000 annual net cash inflow. (Ignore income taxes)
Required:
Compute the net present value of the project at 14% by inputting the variables that are entered into your calculator / Excel. (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response.) Round answers to the nearest dollar and use a minus sign for negative numbers.
1. Interest Rate
(Rate, I, I/YR)%
2.Nper, N
3.PMT$
4.PV$
5.FV$
6.Net present value$
7.Should be project be accepted?