This assignment is a continuation of last week's (week 8) assignment for which the solution will be posted to your week 8 answers in your assignment folder.
A buyer has been found for the existing servers (that will no longer be needed) for $50,000 that will be received in year 1. As of year 1, the servers will have been fully depreciated and have a book value of zero.
The software resulting from the project will be proprietary and not sold, but it is estimated that it would be valued at the end of year 3 for $300,000.
Accounts Receivable is $250,000 in the present year (year 0 and is forecast to decrease 15% annually in year 1 and in each year thereafter. Accounts Payable is presently $150,000 (year 0) and is expected to increase to $200,000 by the end of year 1 and hold constant at that level. No change in inventory working capital is expected.
Prepare a cash flow statement for the proposal and determine the present worth, annual worth, and internal rate of return. Should the project be approved if the MARR for GPA is 10%?