Reference no: EM132596984

Question 1: Gracen Inc is evaluating a new expansion opportunity. The project requires an upfront investment of $14 million. Gracen will also increase inventory by $6 million in year one. In year two, as Gracen increases credit sales, accounts receivable are expected to increase by $3 million. In year five, when the project is complete, all accounts receivable will be collected, decreasing receivables by $3 million. Gracen will also decrease its inventory by $3 million. If the project produces operating cash flows of $3.5 million per year and Gracen's cost of capital is 7.5%, what is the NPV of the project