Question

Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $3.456 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $268,800. The project requires an initial investment in net working capital of $384,000. The project is estimated to generate $3,072,000 in annual sales, with costs of $1,228,800. The tax rate is 31 percent and the required return on the project is 18 percent.

  

Required:
(a)	What is the project's year 0 net cash flow?
	(Click to select)   -4,032,000   -4,224,000   -3,840,000   -3,456,000   -3,648,000

  

(b)	What is the project's year 1 net cash flow?
	(Click to select)   1,547,482   1,466,035   1,710,374   1,628,928   1,791,821

  

(c)	What is the project's year 2 net cash flow?
	(Click to select)   1,628,928   1,710,374   1,547,482   1,791,821   1,466,035

  

(d)	What is the project's year 3 net cash flow?
	(Click to select)   2,418,240   2,088,480   2,308,320   2,198,400   1,978,560

  

(e)	What is the NPV?
	(Click to select)   48,332   85,734   1,468,098   -615,674   50,749

Answer 1

a)

-3,840,000

b)

1,628,928

c)

1,628,928

d)

2,198,400

e)

48,332

Formulae