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Quixotic Enterprises is about to embark on another venture. Poncho Sanchos, the faithful financial analyst, once again will examine the viability of this venture after 31 failures.

A number of windmills are to be constructed on the southern frontier to generate electricity. They will cost $469,000 and will last 11 years, at which time they will have an estimated salvage value of $25,000. However, a capital upgrade of $93,000 will be required at the end of five years. An inventory of spare parts (working capital) amounting to $11,000 will be required during the term of the venture and will be housed in a warehouse that is currently not being used, but which has been used for Quixotics previous ventures. The warehouse could be rented out at $5,000 per year.

This enterprise is expected to generate cash from the sale of electricity of $144,000 a year for 11 years. Cash expenses for each of the 11 years will be $10,000.

The companys tax rate is 28 percent, the CCA rate is 6 percent and the cost of capital is 23 percent.

Requirements:

A. Calculate the Net Present Value of the Windmill venture by completing the table below:

Event	Expected Cash Flow	After-tax Cash Flow	Present Value
Enter cash receipts as positive numbers, cash payments as negative numbers.
Inital Investment
Working Capital
Revenues
Expenses
Opportunity Cost
Capital Upgrade
Salvage
Working Capital Recovery
CCA Tax Shield	N/A	N/A
Net present value	N/A	N/A

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