(1) F-Tesla Motors is evaluating a new project based on the forecasted income statements below:

The companys tax rate is 40%. The project required an initial investment of $15,000 and an additional investment of $2,000 at the end of year two. The working capital is anticipated to be 10% of revenues, and the working capital investment has to be made at the beginning of each period.

Estimate the projects payback period, NPV and IRR to investors in the firm. Assuming the cost of capital is 12%. Recommend if the project should go ahead based on each of the methods.

Year Revenues ($) Cost of goods sold ($) - Depreciation ($) =EBIT ($) 1 10,000 4,000 4,000 2,000 11,000 4,400 3,000 3,600 3 12,000 4,800 2,000 5,200 4 13,000 5,200 1,000 6,800