Atas Threads (AT) is a textile wholesale company. AT is considering building a new inventory warehouse for $900,000. The warehouse would allow AT to increase their pre-tax cash flows by $175,000 each year. The company would plan to use the warehouse for 20 years before selling it for $100,000. The company uses straight-line depreciation. AT's tax rate is 25%, and the required rate of return is 12%.
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

Atas Threads (AT) is a textile wholesale company. AT is considering building a new inventory warehouse for $900,000. The warehouse would allow AT to increase their pre-tax cash flows by $175,000 each year. The company would plan to use the warehouse for 20 years before selling it for $100,000. The company uses straight-line depreciation. AT's tax rate is 25%, and the required rate of return is 12%. 
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 Atas Threads (AT) is a textile wholesale company. AT is considering building a new inventory warehouse for $900,000. The warehouse would allow AT to increase their pre-tax cash flows by $175,000 each year. The company would plan to use the warehouse for 20 years before selling it for $100,000. The company uses straight-line depreciation. AT's tax rate is 25%, and the required rate of return is 12%. 
What is the Excess Present Value Index of the proposed investment (rounded to 4 decimal places)? What does this indicate about the proposed project?

Atas Threads (AT) Is a Textile Wholesale Company