Question

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?
	-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?
	(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?
	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?
	3,572,400 3,215,160 3,929,640 3,393,780 3,751,020

  

  

(e)	What is the NPV?
	-1,014,897 2,395,823 232,789 186,577 195,905

Answer 1