Question
Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset falls into
Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. The project requires an initial investment in net working capital of $300,000 and the fixed asset will have a market value of $210,000 at the end of the project. If the tax rate is 35%, what is the projects year 0 net cash flow? Year 1? Year 2? Year 3? (Enter the answers in dollars. Negative answers should be indicated by a minus sign. Omit $ sign in your response.) Years Cash Flow Year 0 $ Year 1 $ Year 2 $ Year 3 $ If the required return is 12%, what is the project's NPV? (Enter the answer in dollars. Negative answer should be indicated by a minus sign. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV $
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