In the previous problem, suppose the project requires an initial investment in net working capital of $450,000
Question:
In the previous problem, suppose the project requires an initial investment in net working capital of $450,000 and the fixed asset will have a market value of $575,000 at the end of the project. What is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV?
Data from previous problem
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3,950,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,175,000 in annual sales, with costs of $1,455,000
Step by Step Answer:
Corporate Finance Core Principles and Applications
ISBN: 978-1259289903
5th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan