James has asked you to analyze the following investment proposal. James is hoping to enter the waste management business. The initial investment will be $30,000 in working capital and new trucks with a cost of $310,000. The working capital will be recovered at the end of the project. The business will last for 7 years and the trucks will be sold at the end of this time for 50% of their cost. They belong to a 20% CCA class. (there will be assets remaining the class. You do not have to consider recapture or terminal loss). The business is expected to return positive pretax cashflows of $60,000 for the first 2 years and $85,000 for the remaining years. The tashrate is 30% and the cost of capital is 10%. Calculate the NPV for this project.

Required investment

• CCA tax shield
• Total initial investment
• Working capital recovery
• PV of income
• PV of selling price
• Recommendation