An analyst brings you a project. She expects there to be an operating cash flow of $500,000 for the first year, and then it will decease by 10% for six more years. You need to contribute $70,000 in net working capital. You will salvage 50% of that back when the project ends in seven years. You need to purchase $1,800,000 of equipment at the beginning and then another $100,000 in year three. No salvage for equipment. You know your company’s WACC is 9% and this project is very similar to your company’s operations. What is the NPV of this project and should you do it?

Answer rating: 100% (QA)

Calculate the NPV Net Present Value of the project Year 1 500000 Year 2 500000 10 450000 Year 3 4500... View the full answer