Question

Returning to the Vector hybrid bus project, assume that Vector is a nonprofit organization and that the expected additional operating cash inflows are $240,000 in years 1 through 4 and $210,000 in year 5. Using data from here, the net initial investment is $661,500 (new bus, $660,000, plus additional working capital, $30,000, minus current disposal value of old bus, $28,500). All other facts are unchanged: a 5-year useful life, no terminal disposal value, and an 8% RRR. Year 5 cash inflows are $240,000, which includes a $30,000 recovery of working capital.

Calculate the following:

1. Net present value

2. Internal rate of return

3. Payback period

4. Accrual accounting rate of return on net initial investment

Answer 1

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