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FAG Inc., is considering an expansion project that requires an initial fixed asset investment of $4.2 million. The fixed asset will be depreciated straight-line to

FAG Inc., is considering an expansion project that requires an initial fixed asset investment of $4.2 million. The fixed asset will be depreciated straight-line to zero over its three-year life, after which time it will be worthless. The project also requires an initial investment in net working capital (NWC) of $420,000. The project is estimated to generate $3,500,000 in annual sales, with costs of $1,680,000. Suppose the tax rate is 20 percent and the required return is 10 percent.

a. Determine the OCF for the expansion project. (3 marks)

b. What is the project's Year O net cash flow? Year 1? Year 2? Year 3? (8 marks)

C. What is the project's NPV? Should the project be accepted? Explain. (4 marks)

"no computing !!!!! formula plz !!!! "

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