?

Managerial Accounting

Free Version

Upgrade subject to access all content

Moderate

After-Tax Inflows for LB Co.

MGRACT-XXT1YA

LB Co. will invest in a building costing \$2,000,000. The building is estimated to have a life of 20 years, with no salvage value at the end of 20 years. Straight line depreciation is used. The building is expected to produce additional annual income before tax of \$500,000. The income tax rate is 40%. The minimum acceptable rate of return is 18%.

Compute the net present value of the investment (in $).