Question
A firm is considering a new three-year expansion project that requires an initial asset investment of $2.7 million. The fixed asset falls into the three-year
A firm is considering a new three-year expansion project that requires an initial asset investment of $2.7 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,080,000 in annual sales, with costs of $775,000. The project requires an initial investment in net working capital of $300,000 and the fixed asset will have a market value of $210,000 at the end of the project. If the tax rate is 35 percent and the required rate of return is 12 percent, what is the projects NPV?
I calculated all of the OCF's for each year but have no clue how to find the NPV now. Will you explain how to get NPV?
Year MACRS 33.33% 44.45% 14.81% 7.41%Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started