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Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.33 million. The fixed asset will be depreciated
Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.33 million. The fixed asset will be depreciated straightline to zero over its 3 -year tax life. The project is estimated to generate $1,735,000 in annual sales, with costs of $645,000. The project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $255,000 at the end of the project. a. If the tax rate is 25 percent, what is the project's Year 0 net cash flow? Year 1 ? Year 2 ? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.) b. If the required return is 9 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
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