Management at TJX Companies is deciding whether to build a new goods distribution center that will cost

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Management at TJX Companies is deciding whether to build a new goods distribution center that will cost $60 million to build; the estimated additional first-year revenue will be $5 million. Future real revenues will decline due to a depreciation rate of 5% per year. The opportunity cost of this investment is the 7% real interest rate it could otherwise earn on its funds. Should TJX build the new distribution center? Explain. What level of first-year revenue would make this building profitable?

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Principles Of Economics

ISBN: 9781429237864

1st Edition

Authors: Betsey Stevenson, Justin Wolfers

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