Question: Harry Inc. is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. The firm will
Harry Inc. is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. The firm will lease space in this facility to various agencies and groups providing relief services to the area. The firm estimates that this project will initially cost $5 million to set up and will generate $21 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. The firm will require no working capital for this investment. Its marginal tax rate is 35%. The project's cost of cispital is 18.3%. The net present value (NPV) of this temporary housing project is closest to: O a. $4.15 million O b. $1.04 million O c. $7.73 million O d. $2.73 million
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