= 300 ( 1.05 ) 1 = 300 1.05 = 285.71 PV=(1.05)1300=1.05300=285.71 Year 2: = 300 ( 1.05 ) 2 = 300 1.1025 = 272.11 PV=(1.05)2300=1.1025300=272.11 Year 3: = 500 ( 1.05 ) 3 = 500 1.1576 = 431.92 PV=(1.05)3500=1.1576500=431.92 Year 4: = 800 ( 1.05 ) 4 = 800 1.2155 = 658.24 PV=(1.05)4800=1.2155800=658.24 Year 5: (Includes $4,000 cash flow + $2,000 from working capital recovery) = 6 , 000 ( 1.05 ) 5 = 6 , 000 1.2763 = 4 , 701.79 PV=(1.05)56,000=1.27636,000=4,701.79 Total Present Value of Cash Flows = ( 285.71 ) + ( 272.11 ) + ( 431.92 ) + ( 658.24 ) + ( 4 , 701.79 ) = 5 , 778.35 PVtotal=(285.71)+(272.11)+(431.92)+(658.24)+(4,701.79)=5,778.35 Subtract Initial Investment = 5 , 778.35 2 , 000 = 3 , 778.35 NPV=5,778.352,000=3,778.35 Final NPV: $3,778,350 Since the NPV is positive, the company should proceed with the investment in Electrobicycles. Why Are Working Capital Investments Subtracted? Working capital investments represent cash outflows required to sustain operations. Each year, the company needs $200,000 in additional working capital, which reduces available cash. However, since these investments are fully recovered at the end of the project, they are added back in Year 5. Meaning of the Required Rate of Return The required rate of return (5%) represents the minimum return the company expects from the project. This percentage accounts for the risk of the investment and the opportunity