Andronicus Corporation has the following jumbled information about an investment proposal:

1. Revenues in each of years 1-3 = $38,000
2. Year 0 initial investment = $58,000
3. Inventory level = $19,000 in year 1, $21,300 in year 2, and $14,000 in year 3
4. Production costs = $12,400 in each of years 1-3
5. Salvage value = $13,800 in year 4
6. Depreciation = 100% immediate bonus depreciation
7. Tax rate = 21%
8. Customers pay with a 6-month lag

Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 12%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business.

TABLE 6.4 IM&C's guano project. Revised analysis with immediate expensing of investment expenditures. Panel A Capital Investment Period 1 Investment in Fixed Assets 0 1 2 3 2 Sale of Fixed Assets -$ 12, 000 5 6 3 Less Tax on Sale 4 Cash Flow from Capital Investment (2 + 3 + 1) $1949 Panel B Operating Cash Flow -$ 12, 000 $ 409 5 Revenues $ 1540 6 Cost of Goods Sold 523 12 , 887 32 , 610 reciation 4, 000 3 , 037 18 , 901 8 , 939 35 , 834 19 , 717 8 Pretax Profit 12 , 000 20 , 883 10 , 809 0 23, 103 13 , 602 9 Tax -16, 000 -2 , 514 0 10 Profit after Tax -3, 360 3,948 11 , 727 -528 18 , 092 829 12 , 731 2, 463 6, 115 11 Operating Cash Flow -12 , 640 -1,986 3, 799 3, 119 2 , 674 9, 264 1 , 284 Panel C Investment in Working Capital -640 -1, 986 14 , 293 3, 119 10 , 057 3, 264 4, 831 12 Working Capital 14, 293 10 , 057 1, 831 13 Change in Working Capital 550 , 289 3, 261 1, 890 14 Cash flow from investments in working capital (-13) 550 739 3 , 583 1, 972 2, 002 0 Panel D Project Valuation 1, 629 -550 -739 -1, 307 1, 972 -1, 581 -2 , 002 1, 629 15 Total Project Cash Flow (4 + 11 + 14) 1, 307 1, 581 2, 002 16 Discount Factor -12 , 640 -2, 536 2, 380 7, 292 17 Discounted Cash Flow (16 x 17) 1. 000 0. 833 12 , 664 . 694 11 , 364 0. 579 6, 412 18 NPV -12 , 640 -2 , 113 0 . 482 3, 542 1 , 653 0. 402 0. 335 6, 107 . 279 4, 929 4, 220 4, 567 2 , 147 988