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An analyst brings you a project. She expects there to be operating cash flow of $500,000...

An analyst brings you a project. She expects there to be operating cash flow of $500,000 for the first year, and then it will decease by 10% for six more years. You need to contribute $70,000 in net working capital. You will salvage 50% of that back when the project ends in seven years. You need to purchase $1,800,000 of equipment at the beginning and then another $100,000 in year three. No salvage for equipment. You know your company’s WACC is 9% and this project is very similar to your company’s operations. What is the NPV of this project and should you do it?

  • 14,968; Yes you should do the project

  • 16,479; Yes you should do the project

  • 11,459; Yes you should do the project

  • 15,479; No you should not do the project

  • -12,639; Yes you should do the project

  • -9,476; Yes you should do the project

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