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Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.82 million. The fixed asset falls
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.82 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,120,000 in annual sales, with costs of $807,000. The project requires an initial investment in net working capital of $340,000, and the fixed asset will have a market value of $230,000 at the end of the project. |
a. | If the tax rate is 24 percent, what is the projects Year 1 net cash flow? Year 2? Year 3? Table 8.3. |
b. | If the required return is 12 percent, what is the project's NPV? |
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