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Present value of the net working capital changes

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Lourdes Adventure Products is considering a project which will require the purchase of $1.4 million in new equipment. The equipment belongs in a 20% CCA class. Lourdes expects to sell the equipment at the end of the project for 20% of its original cost. Annual sales from this project are estimated at $1.2 million. Net working capital equal to 20% of sales will be required to support the project. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. The project is expected to last 7 years.

What is the present value of the net working capital changes associated with the project?

Reference no: EM133206287

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