Analyze Project A

Use NPV, IRR and Payback to determine if the project should be accepted or rejected. Working Capital 10% of sales. Market rate of return 12%. WACC is 9.84%.

Purchase of capital equipment for expansion

Capital expenditure $1,000,000

Pretax Cash inflows (not including depreciation) Terminal Cash Flow (net of tax) $100,000

Year Revenue Costs

1	250,000	100,000
2	262,500	105,000
3	275,625	110,250
4	289,406	115,763
5	303,877	121,551
6	319,070	127,628
7	335,024	134,010
8	351,775	140,710