(Round all answers to 2 decimal places) A company is considering a new 3-year ex
ID: 2701231 • Letter: #
Question
(Round all answers to 2 decimal places)
A company is considering a new 3-year expansion project that requires an initial fixed asset investment of $1.782 million. The fixed asset falls into the 3-year MACRS class (MACRS Table) and will have a market value of $138,600 after 3 years. The project requires an initial investment in net working capital of $198,000. The project is estimated to generate $1,584,000 in annual sales, with costs of $633,600. The tax rate is 34 percent and the required return on the project is 13 percent. The net cash flow in Year 0 is $___________; the net cash flow in Year 1 is $______________; the net cash flow in Year 2 is $_____________; and the net cash flow in Year 3 is $___________. The NPV for this project is $____________.
Explanation / Answer
inflow depreciation cash inflow(depreciation+after tax inflow)
950400 588060 903295.8
950400 263736 716934
PVF
year 1 0.885
year 2 0.783
year 3 0.693
NPV= 9965083.79-1980000=7985083.77
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