Louie's Leisure Products Is Considering a Project Which Will Require

Multiple Choice

Louie's Leisure 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. Louie's 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%.

What is the present value of the net working capital changes associated with the project?
The project is expected to last 7 years.

A) -$144,087
B) -$95,913
C) $0
D) $144,087
E) $184,837