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Working capital investment is 25% of the anticipated first year sales for Wally’s Waffle House. The...

Working capital investment is 25% of the anticipated first year sales for Wally’s Waffle House. The first-year sales are currently projected at $4,300,000. The incremental cash flow (not including working capital investment) is:

            Initial cash flow = $13,700,000 outflow    Operating cash flow in years 1 through 10 = $2,850,000

a. What is the IRR of the project? Working capital will be recaptured in year 10.

b. What is the maximum amount that Wally should invest in working capital if he has a 15% weighted average cost of capital?

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jeff jeffy answered 1 year ago
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