Chapter 12 problem: Use the following information to determine cash flows for Company ABC. After you find the cash flows, also calculate NPV, IRR, and payback period: Equipment Cost Equipment purchase price: $250,000 Changes in net operating working capital Inventories will rise by $25,000 Accounts payable will rise by $5,000 Effect on operations New sales: 100,000 units/year @ $2/unit Variable cost: 75% of sales Life of the project Economic life: 4 years Salvage value: $30,000 WACC: 15% Tax Rate: 25%

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