NPV; Sensitivity Analysis Griffey & Son operates a plant in Cincinnati and is considering opening

a new facility in Seattle. The initial outlay will be $3,500,000 and should produce after-tax net
cash inflows of $600,000 per year for 15 years. Due to the effects of the ocean air in Seattle, however,
the plant’s useful life may be only 12 years. Cost of capital (discount rate) is 14%.
Required
1. Based on an NPV analysis, should the project be accepted if a 15-year useful life is assumed? What if a
12-year useful life is used? Use appropriate present value annuity factors from Appendix C, Table 2, and
round final answers to the nearest whole dollar.
2. How many years (to 1 decimal place) will be needed for the Seattle facility to earn at least a 14%
return? (Hint: Use the =NPER function in Excel or the formula for the present value annuity factor
given at the bottom of Appendix C, Table 2 to answer this question.)