Question

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $3.51 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 $273,000. The project requires an initial investment in net working capital of $390,000. The project is estimated to generate $3,120,000 in annual sales, with costs of $1,248,000. The tax rate is 32 percent and the required return on the project is 12 percent.

   

Required:
(a)	What is the project's year 0 net cash flow?
	(Click to select)-3,900,000-3,510,000-3,705,000-4,290,000-4,095,000

   

(b)	What is the project's year 1 net cash flow?
	(Click to select)1,482,6241,564,9921,812,0961,647,3601,729,728

   

(c)	What is the project's year 2 net cash flow?
	(Click to select)1,729,7281,647,3601,564,9921,482,6241,812,096

   

(d)	What is the project's year 3 net cash flow?
	(Click to select)2,445,3002,223,0002,111,8502,334,1502,000,700

   

(e)	What is the NPV?
	(Click to select)446,681-709,3681,539,726489,730466,410

  

Answer 1