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Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 million. The fixed asset
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,090,000 in annual sales, with costs of $783,000. The project requires an initial investment in net working capital of $310,000, and the fixed asset will have a market value of $215,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year 1 net cash flow? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. If the required return is 13 percent, what is the project's NPV? (Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89.) a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b. NPV
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a To calculate the net cash flows for each year we need to consider the revenues costs taxes depreciation and changes in net working capital Given Ini...Get Instant Access to Expert-Tailored Solutions
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