Consider a project that will Inst 5 years. This project requires an investment i

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Consider a project that will Inst 5 years. This project requires an investment in fixed asset at date 0 of $2,000,000. This fixed asset will he depreciated to zero over the 5 years, using straight line (SL) depreciation method (Salvage Value at the end of 5 years is $0). In addition, you need to invest $400,000 at date 0 in Net Operating Working Capital (NOWC): basically investment in cash, inventories, etc needed to support sales. This NOWC investment is recovered at the end of the project (date 5). The project results in increased sales of $2,500,000 and increased costs of $1,500,000 each of the next 5 years (date 1, date 2, date 3, date 4, and date 5). Calculate all the cash flows of this project: CF0, CF1, CF2, CF3, CF4, CF5 Given r = 10%, what is the Payback Should you accept this project? Explain.

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