Question
In: Finance
Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset...
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Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.616 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 $436,800. The project requires an initial investment in net working capital of $624,000. The project is estimated to generate $4,992,000 in annual sales, with costs of $1,996,800. The tax rate is 31 percent and the required return on the project is 17 percent. |
| (a) | What is the project's year 0 net cash flow? |
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-6,552,000 -6,864,000 -5,928,000 -5,616,000 -6,240,000 |
| (b) | What is the project's year 1 net cash flow? |
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(Click to select) 2,647,008 2,911,709 2,382,307 2,514,658 2,779,358 |
| (c) | What is the project's year 2 net cash flow? |
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2,779,358 2,514,658 2,647,008 2,382,307 2,911,709 |
| (d) | What is the project's year 3 net cash flow? |
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3,572,400 3,215,160 3,929,640 3,393,780 3,751,020 |
| (e) | What is the NPV? |
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-1,014,897 2,395,823 232,789 186,577 195,905 |
Solutions
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