In: Finance
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.91 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,150,000 in annual sales, with costs of $831,000. The project requires an initial investment in net working capital of $370,000, and the fixed asset will have a market value of $245,000 at the end of the project. |
a. | If the tax rate is 22 percent, what is the project’s Year 1 net cash flow? Year 2? Year 3? Table 8.3. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) |
b. | If the required return is 11 percent, what is the project's NPV? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89.) |