1. Bruno's Lunch Counter is expanding and expects operating cash flows (OCFs) of $26,000 a year for 4 years as a result. This expansion requires an initial investment of $80,000 in new fixed assets at Year 0. These assets will be worthless at the end of the project. There is an initial investment of $10,000 in net working capital in Year 0. The net working capital will be liquidated at the end of the project.
   1. Fill out the following table.

Year	0	1	2	3	4
OCF		26000	26000	26000	26000
Net capital spending (NCS)	-80000
Chg. In NWC	-10000				10000
Project cash flow	-90000	26000	26000	26000	36000

• Hint: project cash flow = OCF Net capital spending chg. In NWC,
  • For example, if OCF=100; NCS= 2,000; Chg. In NWC = -50,

Project cash flow = 100 2,000- (-50)= -1,850

2. What is the net present value (NPV) of this expansion project at a required rate of return of 10 percent? Should the company accept the project?

3. What is the profitability index (PI) of this expansion project at a required rate of return of 10 percent?

4. What is the IRR of this expansion project?