Cost of equipment needed $370,000

Working capital needed $55,000

Overhaul of equipment in four years $20,000

Salvage value of the equipment in five years $20,000

Annual revenues and costs:

Sales revenues $435,000

Cost of goods sold $250,000

Out-of-pocket operating costs $90,000

Discount rate 10 %

a. What is the net present value of the project?

b. The internal rate of return is between what two whole discount rates

c. Reset the discount rate to 10%. Suppose the salvage value is uncertain. How large would the salvage value have to be to result in a positive net present value?