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Please Help!! Caterpillar, Inc., is evaluating a new three-year expansion project. The initial fixed asset investment will be $2,010,000, which will be depreciated straight-line to
Please Help!!
Caterpillar, Inc., is evaluating a new three-year expansion project. The initial fixed asset investment will be $2,010,000, which will be depreciated straight-line to zero over the three-year tax life. The estimated annual sales will be $2,720,000 while the costs will be $1,460,000 each year and the tax rate is 30 percent. At the start of the project, an initial investment in net working capital of $176,000 will be needed. At the end of the project, the fixed assets will have a market value of $211,000. For projects with this level of risk, Caterpillar requires a return of 17 percent. a. What are the net cash flows of the project each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) b. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Step by Step Solution
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