Reynolds Metals Is Considering a Project with a Life of 4

Multiple Choice

Reynolds Metals is considering a project with a life of 4 years that will produce annual operating cash flows of $57,000.During the life of the project,inventory will be lowered by $28,000,accounts receivable will increase by $15,000,and accounts payable will increase by $6,000.The project requires the purchase of equipment at an initial cost of $104,000 that will be depreciated straightline to a zero book value over the life of the project.Ignore bonus depreciation.The equipment will be salvaged at the end of the project creating an aftertax cash inflow of $22,000.At the end of the project,net working capital will return to its normal level.What is the net present value of this project given a required return of 16 percent?

A) $83,483.48
B) $78,117.05
C) $76,153.17
D) $80,037.86
E) $79,876.02