A 4-year project has an initial asset investment of $306,600, and initial net wo

Question

A 4-year project has an initial asset investment of $306,600, and initial net working capital investment of $29,200, and an annual operating cash flow of -$46,720. The fixed asset is fully depreciated over the life of the project and has no salvage value. The net working capital will be recovered when the project ends. The required return is 15 percent. What is the project's equivalent annual cost, or EAC? -$158,491 -$152,309 -$147,884 -$145,509 -$142,212 An explanation would be helpful as well. My numbers don't add up. Thank you.

Explanation / Answer

Present Value = 306600 + 29200 + 46720PVIFA(15%,4) - 29200 PVIF(15%,4) = $452,489.39

EAC = 452489.39/PVIFA(15%,4) = $158491.35

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