Steele Electronics is considering investing in a new

component that #2910

Steele Electronics is considering investing in a new component that requires a $ 100,000
investment in new capital equipment, as well as additional net working capital. The investment
is expected to provide cash flows over the next five years. The anticipated earnings and project
free cash flows for the investment are found in the table below. a. Assuming a project cost of
capital of 11.24%, calculate the project’s NPV and IRR. b. Steele is considering the adoption of
economic profit as a performance evaluation tool. Calculate the project’s annual economic
profit using the invested capital figures found in the table. How are your economic profit
estimates related to the project’s NPV? c. How would your assessment of the project’s worth
be affected if the economic profits in 2016 and 2017 were both negative? (No calculations
required.)
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Steele Electronics is considering investing in a new component that

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