A three-year project has an initial equipment cost of $10,000. The equipment cost will be depreciated in a straight line over the three years towards a $1,000 salvage value. Cash sales are expected to be $25,000 with 70% cost of goods sold. The corporate tax rate is 20% and the appropriate discount rate is 15%.

3.1 What is the project net present value? Should the project be accepted?

3.2 The project will require $8,000 working capital in year 0. What is the project net present value? Should the project be accepted?