Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility
Question:
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $4 million to set up and will generate $20 million in revenues during its first and only year in operation (paid in one year). Operating expenses are expected to total $8 million during this year and depreciation expense will be another $2 million. THSI will require no working capital for this investment. THSI's tax-rate is 20%
Assume that THSI's cost of capital for this project is 15%. The net present value (NPV) of this temporary housing project is closest to?
