Question

Winston Hardware is analyzing a proposed project that requires an initial investment of $39,900 for fixed...

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?

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Answer #1

Since the NPV is negative, project should not be accepted.

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