Net Present Value Analysis and Qualitative Factors, Alternative Format.

Petes Plumbing Supplies would like to expand into a new

warehouse at a cost of $500,000. The warehouse is expected to have a life

of 20 years, and a salvage value of $100,000. Annual costs for maintenance,

insurance, and other cash expenses will total $60,000. Annual net cash

receipts resulting from this expansion are predicted to be $115,000. The

companys required rate of return is 12 percent.

Required:

a. Find the net present value of this investment using a presentable format. Round to the nearest dollar.

b. Should the company purchase the new warehouse? Explain.

c. Provide one qualitative factor that might cause the company to reach a

different conclusion than the one reached in requirement b.