Down Under Boomerang, Inc., is considering a new three-year expansion project th

Question

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.76 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,100,000 in annual sales, with costs of $795,000. The tax rate is 34 percent and the required return is 12 percent. The project requires an initial investment in net working capital of $320,000, and the fixed asset will have a market value of $220,000 at the end of the project.

  

What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

   

What is the NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Please answer for cash flow year 0,1,2,3 and nvp. Thanks

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.76 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,100,000 in annual sales, with costs of $795,000. The tax rate is 34 percent and the required return is 12 percent. The project requires an initial investment in net working capital of $320,000, and the fixed asset will have a market value of $220,000 at the end of the project.

  

What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

   

  Years                   Cash Flow   Year 0 $      Year 1 $      Year 2 $      Year 3 $   

What is the NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  NPV $   

Explanation / Answer

All figures are in millions Year 0 1 2 3 Initial Investment -2.76 Sales 2.1 2.1 2.1 Cost 0.795 0.795 0.795 Depreciation 0.92 0.92 0.92 Working capital -0.32 Sale of fixed assets 0.22 Cash flow -3.08 0.385 0.385 0.605 Tax 0.1309 0.1309 0.2057 Add: Depreciation 0.92 0.92 0.92 Net Cash flows (yearly) -3.08 1.1741 1.1741 1.3193 PVF @ 12% 1 0.893 0.797 0.712 PV -3.08 1.048471 0.935758 0.939342 NPV -0.16

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