Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.752 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 $369,600. The project requires an initial investment in net working capital of $528,000. The project is estimated to generate $4,224,000 in annual sales, with costs of $1,689,600. The tax rate is 31 percent and the required return on the project is 12 percent. Required: (a) What is the project's year O net cash flow? (Click to select) ▼ (b)What is the project's year 1 net cash flow? (Click to select) (c) What is the project's year 2 net cash flow? (Click to select) v (d)What is the project's year 3 net cash flow? (Click to select) ✓ (e)What is the NPV? (Click to select) v
Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.752 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 $369,600. The project requires an initial investment in net working capital of $528,000. The project is estimated to generate $4,224,000 in annual sales, with costs of $1,689,600. The tax rate is 31 percent and the required return on the project is 12 percent. Required: (a) What is the project's year O net cash flow? (Click to select) ▼ (b)What is the project's year 1 net cash flow? (Click to select) (c) What is the project's year 2 net cash flow? (Click to select) v (d)What is the project's year 3 net cash flow? (Click to select) ✓ (e)What is the NPV? (Click to select) v
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 26P
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