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Problem 6-4 Calculating Project Cash Flow from Assets sfandairi Enterprises is considering a new 3-year expansion project that requires nitial fixed asset investment of $2.29 million. The fixed asset will be depreciat raight-line to zero over its 3-year tax life. The project is estimated to genera 1,790,000 in annual sales, with costs of $700,000. The project requires an ini vestment in net working capital of $410,000, and the fixed asset will have a marl alue of $420,000 at the end of the project. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2 Year 3? (Do not round intermediate calculations and enter your answers in dollar not millions of dollars. e.g. 1.234.567 A negative answer should be indicated by

Problem 6-4 Calculating Project Cash Flow from Assets sfandairi Enterprises is considering a new 3-year expansion project that requires nitial fixed asset investment of $2.29 million. The fixed asset will be depreciat raight-line to zero over its 3-year tax life. The project is estimated to genera 1,790,000 in annual sales, with costs of $700,000. The project requires an ini vestment in net working capital of $410,000, and the fixed asset will have a marl alue of $420,000 at the end of the project. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2 Year 3? (Do not round intermediate calculations and enter your answers in dollar not millions of dollars. e.g. 1.234.567 A negative answer should be indicated by

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 5BE
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Problem 6-4 Calculating Project Cash Flow from Assets Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,790,000 in annual sales, with costs of $700,000. The project requires an initial investment in net working capital of $410,000, and the fixed asset will have a market value of $420,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) a. Year 0 cash flow a. Year 1 cash flow a. Year 2 cash flow a. Year 3 cash flow b. NPV
Transcribed Image Text:Problem 6-4 Calculating Project Cash Flow from Assets Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,790,000 in annual sales, with costs of $700,000. The project requires an initial investment in net working capital of $410,000, and the fixed asset will have a market value of $420,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) a. Year 0 cash flow a. Year 1 cash flow a. Year 2 cash flow a. Year 3 cash flow b. NPV
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