Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,110,000 in annual sales, with costs of $799,000. The project requires an initial investment in net working capital of $330,000, and the fixed asset will have a market value of $225,000 at the end of the project.

cash flow

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NPV:

RECOVERY PERIOD CLASS YEAR 3 YEARS 5 YEARS7 YEARS 10 YEARS 1000 1800 1440 1152 15 YEARS 20 YEARS 1429 2449 1749 1249 07219 1481 0741 1920 1152 1152 0576 0855 0770 0693 0623 0590 0590 0591 0590 0591 0590 0591 0590 0591 0295 06177 05713 05285 .0737 .0655 .0655 0656 .0655 04522 10 04461 04461 12 13 14 15 16 17 18 19 20 21 04461 04461 04461 04461 02231 Depreciation is expressed as a percent of the asset's cost. These schedules are based on the IRS publication 946. How to Depreciate Property and other details on depreciation are presented later in the chapter. Note that five-year depreciation actually carries over six years because the IRS assumes purchase is made in midyear