Use the following information to answer questions 1 through 5:
The required return on a project is 9.5 percent. The initial cash outflow of a project is $127,600 and the inflows are as follows:
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Year
|
Cash Inflows
|
|
1
|
$41,000
|
|
2
|
$0
|
|
3
|
$43,750
|
|
4
|
$87,500
|
1. What is the net present value of the project?
2. What is the IRR of the project?
3. What is the payback of the project?
4. What is the discounted payback of the project?
5. What is the profitability index of the project?
6. Determine the impact on Net Working Capital (Increase, Decrease, or No Change) for each of the following:
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Net Working Capital Impact
|
|
Increase inventory by $30,000
|
|
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Decrease accounts payable by $20,000
|
|
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$2,000 sale of an asset that had an original cost of $10,000 and currently has a $0 book value
|
|
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Purchase of equipment for $40,000 and incurring $3,000 to install the equipment
|
|
|
Increase accounts receivable by $5,000
|
|