Lakeside Marina is considering expanding its seasonal docking facilities. Construction would take place in year one, with
Question:
Lakeside Marina is considering expanding its seasonal docking facilities. Construction would take place in year one, with costs of $145,000 paid at the start of the first year, and some additional landscaping costs of $3,500 paid at the start of the second year. The docks would have a useful life to the end of year 15, with no residual value. The increased capacity should generate increased annual profits of $15,000 at the end of years 2 through 5, and $20,000 at the end of years 6 through 15. If Lakeside’s cost of capital is 6% compounded annually,
a) What is the NPV of the project?
NPV $
b) Should Lakeside undertake the expansion? multiple choice
Yes or No
Foundations of Finance
ISBN: 978-0134084015
9th edition
Authors: Arthur J. Keown, John H. Martin, J. William Petty