Question
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.64 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 $2.64 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 $2,060,000 in annual sales, with costs of $755,000. The project requires an initial investment in net working capital of $280,000, and the fixed asset will have a market value of $270,000 at the end of the project. If the tax rate is 35 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 13 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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