Share
Explore BrainMass

# Net Present Value of project to open a car dealership

You are thinking about opening a car dealership. You bought some real estate last year for \$700,000 which you will use for the dealership. The market value of this real estate today is \$1,200,000. To build the necessary showroom and shop it will cost you \$600,000, a cost which you will depreciate over 3 years. You estimate an increased need for net working capital in year zero in the amount of \$40,000 which will be recovered at the end of the project. From your dealership you expect to generate annual revenues of \$800,000 and have operating expenses of \$200,000, and you have a 30% tax rate. Bank of America has offered to lend you \$850,000 at an interest rate of 6% to be repaid over 5 years. If your cost of capital (discount rate) is 10% what is the net present value of this project?

1. 1223742
2. -790338
3. -616258
4. -676364
5. 533742
6. -360000

#### Solution Summary

Solution helps in analyzing Net Present Value of project to open a car dealership

\$2.19