Below is my homework problem. If possible, I would like to have the work shown o

Question

Below is my homework problem. If possible, I would like to have the work shown of how to solve this problem. This way I can understand the method to solving it. Also I am not allowed to use ecxel to do the calculations.

A project will produce operating cash flows of $60,000 a year for four years. During the life of the project, inventory will be lowered by $20,000 and accounts receivable will increase by $25,000. Accounts payable will decrease by $10,000. The project requires the purchase of equipment at an initial cost of $200,000. 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 $30,000 after-tax 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 12 percent?

Explanation / Answer

CF0 = 20000 - 25000 - 10000 - 200000 =-215000

CO4= 60000 -20000 +25000 +10000 + 30000 = 105000

NPV = -215000 + (60000/(1+0.12)) + (60000/(1+0.12)^2) +(60000/(1+0.12)^3) +(105000/(1+0.12)^4)

=-4160.725

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