Winston Hardware is analyzing a proposed project that requires an initial investment of $39,900 for fixed assets and $9,900 for net working capital. The project is expected to produce operating cash flows of $11,400 a year for 4 years. The net working capital can be recouped at the end of the project. The fixed assets have an estimated aftertax salvage value of $16,900. Should this project be accepted if the required rate of return is 13.9 percent? Why or why not? What is the NPV?
Since the NPV is negative, project should not be accepted.
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