Question
In: Finance
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project
that requires an initial fixed asset investment of 2.37 million.
The fixed asset qualifies for 100 percent bonus depreciation in the
first year. The project is estimated to generate 1,780,000 in
annual sales, with cost of 676,000. The project requires an initial
investment in net working capital of 390,000, and the fixed asset
will have a market value of 390,000 at the end of the project.
a. If the tax rate is 24 percent, what is the projects Year 0
net cash flow? Year 1? Year 2? Year 3?
b. If the required return is 10 percent, what is the project's
NPV?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
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worthless. The project is estimated to generate $2,160,000 in
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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.37
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,765,000 in
annual sales, with costs of $675,000. The tax rate is 21 percent
and the required return on the project is 12 percent. What is the
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$300,000, and the fixed asset will have a market value of $255,000
at the end of the project.
a.
If the tax...
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