Question 4

\begin{tabular}{|l|r|r|r|r|} \hline Sales & & 1645000 & 1645000 & 1645000 \\ \hline Less: cost & & 610000 & 610000 & 610000 \\ \hline Earning before dep a nd tax & & 1035000 & 1035000 & 1035000 \\ \hline Less dep & & 726666.67 & 726666.67 & 726666.67 \\ \hline Earning before tax & & 308333.33 & 308333.33 & 308333.33 \\ \hline Less: tax & & 64750 & 64750 & 64750 \\ \hline Earning after tax & & 243583.33 & 243583.33 & 243583.33 \\ \hline Add: dep & & 726666.67 & 726666.67 & 726666.67 \\ \hline & & & & \\ \hline Cashflow & & 970250 & 970250 & 970250 \\ \hline \end{tabular} 4. Calculating Project Cash Flow from Assets In the previous problem, suppose 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. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3 ? What is the new NPV? 3. Calculating Project NPV Esfandairi Enterprises is Page 195 considering a new three-year expansion project that requires an initial fixed asset investment of $2.18 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 $1.645 million in annual sales, with costs of $610,000. The required return is 12 percent. If the tax rate is 21 percent, what is the project's NPV