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 $2.32 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent.
a. What is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3?
b. If the required return is 12 percent, what is the project's NPV?
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Solutions
jeff jeffy answered 1 year agoRelated Solutions
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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 $2.32
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 $1.735 million in
annual sales, with costs of $650,000. The project requires an
initial investment in net working capital of $250,000, and the
fixed asset will have a market value of $180,000 at the...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
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project that requires an initial fixed asset investment of $2.94
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 $2,160,000 in
annual sales, with costs of $855,000. The project requires an
initial investment in net working capital of $380,000, and the
fixed asset will have a market value of $250,000 at the end...
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at the end of the project.
a.
If the tax...
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