Middlefield Motors is considering a project that would last for 3 years and have a cost of capital of 17.12 percent. The relevant level of net working capital for the project is expected to be 20,000 dollars immediately (at year 0); 13,000 dollars in 1 year; 37,000 dollars in 2 years; and 0 dollars in 3 years. Relevant expected operating cash flows and cash flows from capital spending in years 0, 1, 2, and 3 are presented in the following table. What is the net present value of this project?
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Operating cash flows (in dollars) | 0 | 61,000 | 64,000 | 58,000 |
| Cash flows from capital spending (in dollars) | -107,000 | 0 | 0 | 15,000 |
| Calculation of NPV | |||||||
| Year | Captial | Working captial | Operating cash | Annual Cash flow | PV factor @ 17.12% | Present values | |
| 0 | (107,000) | (20,000) | - | (127,000) | 1.000 | (127,000) | |
| 1 | (13,000) | 61,000 | 48,000 | 0.854 | 40,984 | ||
| 2 | (37,000) | 64,000 | 27,000 | 0.729 | 19,683 | ||
| 3 | 15,000 | 70,000 | 58,000 | 143,000 | 0.622 | 89,011 | |
| Net Present Value | 22,678 | ||||||
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