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%?

Answer rating: 100% (QA)

Solution Cost of the equipment 120000 Decrease in NWC 150001000030000 5000 Init... View the full answer