Worldwide Liquidators (WL) is a carpet wholesale company. WL is considering building a new inventory warehouse for $400,000. The warehouse would allow WL to increase their pre-tax cash flows by $50,000 each year. The company would plan to use the warehouse for 20 years before selling it for $200,000. The company uses straight-line depreciation. WL's tax rate is 25%, and the required rate of return is 10%.
What is the Excess Present Value Index of the proposed investment (rounded to 4 decimal places)? What does this indicate about the proposed project?

Question

Worldwide Liquidators (WL) is a carpet wholesale company. WL is considering building a new inventory warehouse for $400,000. The warehouse would allow WL to increase their pre-tax cash flows by $50,000 each year. The company would plan to use the warehouse for 20 years before selling it for $200,000. The company uses straight-line depreciation. WL's tax rate is 25%, and the required rate of return is 10%. 
What is the Excess Present Value Index of the proposed investment (rounded to 4 decimal places)? What does this indicate about the proposed project?

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The Answer of Worldwide Liquidators (WL) is a carpet wholesale company. WL is considering building a new inventory warehouse for $400,000. The warehouse would allow WL to increase their pre-tax cash flows by $50,000 each year. The company would plan to use the warehouse for 20 years before selling it for $200,000. The company uses straight-line depreciation. WL's tax rate is 25%, and the required rate of return is 10%. 
What is the Excess Present Value Index of the proposed investment (rounded to 4 decimal places)? What does this indicate about the proposed project?

Worldwide Liquidators (WL) Is a Carpet Wholesale Company