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Tutorial 16136

A project will produce operating cash flows of $45,000 a year for four years. During the life of the project, inventory will be lowered by $30,000 and...

Question:

A project will produce operating cash flows of $45,000 a year for four years. During the life of the project, inventory will be lowered by $30,000 and accounts receivable will increase by $15,000. Accounts payable will decrease by $10,000. The project requires the purchase of equipment at an initial cost of $120,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a $25,000 after-tax cash   flow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 14 percent?

ATTACHMENTS
solutions_4.xlsx