United Pigpen is considering a proposal to manufacture highprotein hog feed. The project would make use of an
existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse
is $ and thereafter, the rent is expected to grow in line with inflation at a year. In addition to using the
warehouse, the proposal envisages an investment in plant and equipment of $ million. This could be depreciated for
tax purposes straightline over years. However, Pigpen expects to terminate the project at the end of years and to
resell the plant and equipment in year for $ Finally, the project requires an immediate investment in working
capital of $ Thereafter, working capital is forecasted to be of sales in each of years through Year sales
of hog feed are expected to be $ million, and thereafter, sales are forecasted to grow by a year, slightly faster
than the inflation rate. Manufacturing costs are expected to be of sales, and profits are subject to tax at The
cost of capital is
What is the NPV of Pigpen's project?
Note: Enter your answer in thousands, not in millions, rounded to the nearest dollar.
NPV
and
