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Bentley Inc. has identified a project with the following cash flows. Bentley Inc. is considering a new three-year expansion project that requires an initial fixed
Bentley Inc. has identified a project with the following cash flows. Bentley Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $1,650,000. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30 percent per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $1,975,000 in annual sales, with costs of $585,000. The tax rate is 24 percent. Please make sure your final answer(s) are accurate to 2 decimal places. a) What is the OCF for each year of this project? Now, suppose the required return on the project is 22 percent. b) What is the PV of the annual cash flows (net annual revenues with CCA excluded)? PV of annual cash flows = $ c) What is the PV of the salvage value? PV of the salvage value = $ d) What is the PV of the CCA tax savings (CCATS) (salvage included)? PV of CCATS = $ e) What is the project's NPV? NPV = $ Finally, suppose the project requires an initial investment in net working capital of $230,000 and the fixed asset will have a market value of $450,000 at the end of the project. f) What is the PV of the working capital impact on the project? PV of working capital impact = $ g) What is the new PV of CCATS? PV of CCATS = $ h) What is the project's new NPV? New NPV = $
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