What is the net present value of this project


You purchased land 3 years ago for $55000 and believe its market value is now $105000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $132500, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $175000 each year, while expenses will be a mere $24000 each year. The initial working capital requirement will be $9000 which will be recovered in the last year. The tax rate is 35%. Your estimated cost of capital is 10%. What is the net present value of this project?

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Accounting Basics: What is the net present value of this project
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