Down Under Boomerang, Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $2.4 million.The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless.The project is estimated to generate $2,050,000 in annual sales, with costs of $950,000.The tax rate is 35% and the required return is 12 percent.

a. Calculate the projects NPV and IRR.

b. Suppose that Down Under Boomerang is projected to grow at a rate of 4% after year 3.What is the value of the firm?

In problem above, suppose the project requires an initial investment in net working capital of $285,000 and the fixed asset will have a market value of $225,000 at the end of the project.

a. What are the new NPV and IRR?

b. Now what is the value of the firm?