Question: Example 3-6: Timco is considering the construction of a new retail outlet. The construction cost will be 400000. Net working capital will increase by 10000.

Example 3-6: Timco is considering the construction of a new retail outlet. The construction cost will be 400000. Net working capital will increase by 10000. The depreciation is 10 year MACRS. The new location will increase sales by 90000 and increase costs by 40000 per year. The tax rate is 40%. Assume we can sell the location for 50000 at the end of the tenth year.The WACC is 8%. Find the NPV. Should we buy it?

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