With energy costs greater than ever, Berwick's Bike Shop is well-placed for an expansion. Its initial capital cost (not including working capital) is $750,000, expected after-tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is $75,000. If this project has a required rate of return of 15% and the initial cost of working capital is $100,000, should Berwick expand the bike shop? (Assume that the $100,000 of working capital is recovered in Year five at the end of the project life) Compute a Net Present Value (NPV) to support your decision..

Question 40 options:

	Yes, because the NPV = $8,759
	No, because the NPV = -$850,000
	No, because the NPV = -$8,759
	Yes, because the NPV = $858,759