The Gabriel Co. is considering a 7-year project that would require a cash outlay of $140,000 for machinery and an additional $30,000 for working capital that would be released at the end of the project. The equipment would be depreciated evenly over the 7 years and have a salvage value of $ 7,000 at the end of 7 years. The project would generate before tax annual cash inflows of $41,500. The tax rate is 20% and the company's discount rate is 12%.

Initial investment	140000
Increase in working capital	30000
Length of investment	7
Salvage value	7000
Before tax annual cash inflows	41500
Tax rate	0.2
Discount rate	0.12
Annual cash inflows	$41,500
Depreciation expense	$19,000
EBT	$22,500
Income tax	$4,500
Accounting Income	$18,000
Accounting income	$18,000
Add back depr. Expense	$19,000
Annual after tax cash inflows	$37,000
Initial investment	$140,000
Increase in working capital	$30,000
Initial cash outflows	$170,000
Annual after tax cash inflows	$37,000
Payback	4.6 years

1. What is the discounted payback based upon the initial cash outflows?
2. What is the simple rate of return based upon the initial cash outflows?
3. What is the net present value?
4. What is the internal rate of return?
5. Would you recommend this project or not? Why?