Assume you have completed a capital budgeting analysis of bu

Assume you have completed a capital budgeting analysis of building a new plant on land you own, and the project\'s NPV is $100 million. You now realize that instead of building the plant, you could build a parking garage, and would generate a pre tax revenue of $21 million. The project would last 3 years, the corporate tax rate is 40%, and the WACC is 6%. What is the new NPV of the project, after incorporating the effect of the opportunity cost?

Enter your answer in millions of dollars, rounded to 2 decimals, without the dollar sign. So, if your answer is 12,345.6789, just enter 12345.68.

Solution

NPV of project after incorporating the effect is 33.68-100= -66.32

NPV of project after incorporating effect is -66.32 million