P10-12 NPV and Modified ACRS [LO1]

Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.5 million. The fixed asset falls into the 3-year MACRS class (MACRS Table) and will have a market value of $348,600 after 3 years. The project requires an initial investment in net working capital of $498,000. The project is estimated to generate $3,984,000 in annual sales, with costs of $1,593,600. The tax rate is 24 percent and the required return on the project is 11 percent.

What is the project's year 0 net cash flow?

$-4,998,000

$-4,498,200

$-4,748,100

$-1,959,001

$-2,067,835

What is the project's year 1 net cash flow?

$2,176,668

$1,959,001

$2,067,835

$2,285,501

$2,394,335

What is the project's year 2 net cash flow?

$2,296,764

$1,959,001

$2,181,926

$2,411,602

$2,285,501

What is the project's year 3 net cash flow?

$2,819,616

$2,537,654

$2,678,635

$2,960,597

$2,285,501

What is the NPV?

$888,746.27

$770,378.25

$10,317,243.60

$933,183.58

$844,308.95