Question: PLEASE SHOW WORK NOT IN EXCEL SO I UNDERSTAND HOW TO DO THIS Coffee is Life Company is considering purchasing a new coffee grinder. The

PLEASE SHOW WORK NOT IN EXCEL SO I UNDERSTAND HOW TO DO THIS

Coffee is Life Company is considering purchasing a new coffee grinder. The installed cost is $100,000 and requires nominal increase in NWC (net working capital). It can be sold at the end of year 3 for an anticipated $30,000. Use MACRS 3 year. Remember to add terminal cash flow.

Anticipated cash flows prior to depreciation: year 1 $40,000, year 2 $48,000, year 3 $20,000.

a. What is the operating cash flow (OCF) for year 3 not including terminal value?

b. Calculate the NPV for this proposal if the cost of capital is estimated to be 10%. Use your OCFs calculated.

c. What is the project IRR?

d. What is the project payback?

e. What is the project discounted payback?

f. Should they go forward with the project?

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