Considering abandoning the business

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Reference no: EM131506509

(NPV and abandonment) The owners of Egg Sauce,Ltd. are tired of their business. In fact, they are so exhausted that they are considering abandoning the business. The building and land could be sold for 700,000 and would provide an after tax amount of 640,000. The equipment could be sold at auction for about 55,000 and, at the price, they could claim a tax credit of 5000. The building needs renovation about every 10 years.The before tax EAC of this periodic maintenance is 40,000, and the after tax EAC, including the effect of depreciation, is 30,000. The annual revenues minus expenses (including all employee costs) from running Egg Sauce are 200,000 per year, and the firm pays taxes at the rate of 35% on this amount. The investments cost of capital is 15%. What is the NPV from abandoning Egg Sauce?

multiple choice are:

-$200,000. -$175,000. -$150,000. -$100,000. -$75,333. -$33,333. $33,333. $73,333. $120,000. $150,000. $175,000. $200,000

Reference no: EM131506509

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