Question
In: Finance
7A) Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset...
7A) Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.9
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 $2,190,000 in
annual sales, with costs of $815,000. If the tax rate is 35
percent, what is the OCF for this project? Suppose the required
return on the project is 12 percent. What is the project's
NPV?
7B. In the previous problem, suppose the project requires an
initial investment in net working capital of $300,000, and the
fixed asset will have a market value of $210,000 at the end of the
project. What is the project's Year 0 net cash flow? Year 1? Year
2? Year 3? What is the new NPV?
7C. Suppose the fixed asset actually falls into the three-year
MACRS class. All the other facts are the same. What is the
project's Year 1 net cash flow now? Year 2? Year 3? What is the new
NPV?
Please answer with Excel formulas included.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
7A) Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset...
7A) Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.9
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 $2,190,000 in
annual sales, with costs of $815,000. If the tax rate is 35
percent, what is the OCF for this project? Suppose the required
return on the project is 12 percent. What...
A) Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset...
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over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $2062531 in annual
sales, with costs of $819158. If the tax rate is 33 percent and the
required return on the project is 11 percent, what is the project's
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