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ABC Co. is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated
ABC Co. is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. 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. What is the project's cash flow for Year's O through Year 3? The tax rate is 21 percent. If the required return is 12 percent, what is the project's NPV? $ $ Asset investment Estimated annual sales Costs Net working capital Pretax salvage value Tax rate Project and asset life Required return 2,900,000 2,190,000 815,000 300,000 210,000 21% 3 12% Complete the following analysis. Do not hard code values in your calculations. Aftertax salvage value Sell Equipment Taxes Aftertax cash flow Year o Year 1 Year 2 Year 3 Sales Costs Depreciation EBT Taxes Net income Capital spending Net working capital OCF Net cash flow NPV
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