Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.7 million. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. The tax rate is 21 percent. Suppose the required return on the project is 12 percent.

a. Suppose the project requires an initial investment in net working capital of $300,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will have a market value of $210,000. All additional investments in net working capital will be recovered at the end of the project. What is the projects IRR?

b.) Suppose the project requires an initial investment in net working capital of $300,000. Also suppose the fixed asset actually falls into the three-year MACRS class, and in three years, it will have a market value of $210,000. All additional investments in net working capital will be recovered at the end of the project. What is the projects PI?

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