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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.32 million. The fixed asset will be depreciated
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.32 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent. |
a. | What is the projects Year 0 net cash flow? Year 1? Year 2? Year 3? |
b. | If the required return is 12 percent, what is the project's NPV? |
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