Question

Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $3.564 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $277,200. The project requires an initial investment in net working capital of $396,000. The project is estimated to generate $3,168,000 in annual sales, with costs of $1,267,200. The tax rate is 24 percent and the required return on the project is 14 percent.

  
What is the project's Year 0 net cash flow?
$-3,960,000
$-4,158,000
$-4,356,000
$-3,762,000
$-3,564,000

What is the project's Year 1 net cash flow?
1,729,728
$1,816,214
$1,902,701
$1,643,242
$1,556,755

What is the project's Year 2 net cash flow?
1,729,728
$1,816,214
$1,902,701
$1,643,242
$1,556,755

What is the project's Year 3 net cash flow?
2,336,400
$2,453,220
$2,570,040
$2,219,580
$2,102,760

What is the NPV?
465,278
$(1,125,303)
$2,427,128
$451,792
$488,542

Answer 1

What is the project's Year 0 net cash flow?
$-3,960,000

What is the project's Year 1 net cash flow?
1,729,728

What is the project's Year 2 net cash flow?
1,729,728

What is the project's Year 3 net cash flow?
2,336,400

What is the NPV?
465,278

For all the above, see below calculations