Question
Quad Enterprises is considering a new three year expansion project that requires an initial fixed asset investment of 2.85 million. The fixed asset will be
Quad Enterprises is considering a new three year expansion project that requires an initial fixed asset investment of 2.85 million. The fixed asset will be depreciated straight-line to zero over its three year tax life. The project is estimated to generate $2,130,000 in annual sales, with costs of $825,000. The project requires an initial investment in networking capital of $350,000, and the fixed asset will have a market value of $235,000 at the end of the project. If the tax rate is 34 percent , what is the projects year 0 net cash flow? Year 1? Year 2? Year 3? If the required return is 11 %, what is the projects NPV?
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