Question
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,180,000 in annual sales, with costs of $875,000. The project requires an initial investment in net working capital of $400,000, and the fixed asset will have a market value of $260,000 at the end of the project. If the tax rate is 30 percent, what is the projects Year 0 net cash flow? Year 1? Year 2? Year 3? (Enter your answers in dollars, not millions of dollars (e.g., 1,234,567). Negative amounts should be indicated by a minus sign.) Years Cash Flow Year 0 $ Year 1 $ Year 2 $ Year 3 $ If the required return is 9 percent, what is the project's NPV? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).) NPV $
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