Net present value

Declan MacManus is considering a capital budgeting project. This project will initially

require a $25,000 investment in equipment and a $3,000 working capital investment. The

useful life of this project is 5 years with an expected residual value of zero on the equipment.

The working capital will be released at the end of the 5 years. The new system is expected to

generate net cash inflows of $9,000 per year in each of the 5 years. Also a repair of the

equipment will be required at the END of year 3, costing $5,000. MacManus’ discount rate

is 14%. The net present value of this project is closest to (ignoring taxes):

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