Ginga Company has been offered a five-year contract to provide component parts for a large manufacturer.

At the end of five years the working capital will be released and may be used elsewhere by Ginga. Ginga Company uses a discount rate of 12%. Required: a. Calculate the annual net cash flow for the project b. Using the annuity table, determine the present value of the annual net cash flow c. Determine the Net Present Value (NPV) of the project d. Should the contract be accepted or rejected? Provide reason for your answer

Cost and revenue information Cost of special equipment $ 150,000 Working capital required 100,000 Relining equipment in 3 years 25,000 Salvage value of equipment in 5 years 5,000 Annual cash revenue and costs: Sales revenue from parts 750,000 Cost of parts sold 400,000 Salaries, shipping, etc. 250,000