Question
All answers must be entered as a formula in excel Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset
All answers must be entered as a formula in excel
Quad Enterprises 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 projects Year 0 net cash flow? Year 1? Year 2? Year 3? The tax rate is 21 percent. If the required return is 12 percent, what is the projects NPV?
Asset investment $2,900,000
Estimated annual sales $2,190,000
Costs $815,000
Net working capital $300,000
Pretax salvage value $210,000
Tax rate 21%
Project and asset life 3
Required return 12%
Complete the following analysis. Do not hard code values in your calculations. You must use the built-in Excel function to calculate the NPV.
Aftertax cash flow
Sales
Costs
Depreciation
EBT
Taxes
Net income
Capital spending
Net working capital
OCF
Net cash flow
NPV
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