Problem: Coffee is Life Company is considering purchasing a new coffee grinder. The installed cost is $100,000 and requires nominal increase in NWC (net working capital). It can be sold at the end of year 3 for an anticipated $30,000. se MACRS 3 year. Remember to add terminal cash flow. Explain your answers and provides examples.

Anticipated cash flows prior to depreciation: year 1 $40,000, year 2 $48,000, year 3 $20,000.

Required:

1. What is the operating cash flow (OCF) for year 3?

2. Calculate the NPV for this proposal if the cost of capital is estimated to be 10%. Use your OCF calculated.

3. What is the project IRR?

4. What is the project payback?

5. What is the project discounted payback?

6. Should they go forward with the project?