Problem:
Given the following information, calculate the NPV of a proposed project: Cost = $4,000; estimated life = 3 years; initial decrease in accounts receivable = $1,000, which must be restored at the end of the project's life; estimated salvage value = $1,000; earnings before taxes and depreciation = $2,000 per year; method of depreciation = MACRS; tax rate = 40 percent; and cost of capital = 18 percent.
a. $1,137
b. -$ 151
c. $ 137
d. $ 804
e. $ 544