Question
In: Finance
Down Under Boomerang, Inc., is considering a new 7-year project that requires an initial investment in...
Down Under Boomerang, Inc., is considering a new 7-year project that requires an initial investment in a fixed asset of $2.376 million. The fixed asset will be depreciated straight-line to zero over its 7-year life. After Year 0, the project is expected to generate $2,112,000 in annual sales per year, with operating costs of $844,800 per year. The tax rate is 34 percent and the appropriate discount rate is 9 percent. The project requires an increase in net working capital of $264,000 in Year 0. Net working capital will not change after Year 0 until the last year of the project, at which time net working capital will be completely recovered. The fixed asset will have a salvage value (before-tax) of $184,800 in the last year of the project.
What is the NPV of the project?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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to zero over its three-year tax life, after which it will be
worthless. The project is estimated to generate $2,050,000 in
annual sales, with costs of $950,000. The tax rate is 35% and the
required return is 12 percent. Calculate the projects NPV and IRR.
Suppose that Down Under Boomerang is projected...
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