Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $73,000

Bruno's Lunch Counter is expanding and expects operating cash flows of $29,000 a year for 4 years as a result. This expansion requires $39,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $3,000 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 15 percent?    A.  $18,477.29 B.  $21,033.33 C.  $28,288.70 D.  $29,416.08 E.  $42,509.63

70.

Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $73,000 a year for 7 years. At the beginning of the project, inventory will decrease by $16,000, accounts receivables will increase by $21,000, and accounts payable will increase by $15,000. All net working capital will be recovered at the end of the project. The initial cost of the molding machine is $249,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a $48,000 aftertax cash flow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 14.5 percent?    A.  $77,211.20 B.  $79,418.80 C.  $82,336.01 D.  $84,049.74 E.  $87,925.54 CF0 = -$249,000 + $16,000 - $21,000 + $15,000 = -$239,000 C07 = $73,000 + $48,000 - $16,000 + $21,000 - $15,000 = $111,000