Question
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.646 million. The fixed asset will be
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.646 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $205,800. The project requires an initial investment in net working capital of $294,000. The project is estimated to generate $2,352,000 in annual sales, with costs of $940,800. The tax rate is 35 percent and the required return on the project is 10 percent. what are the net cash flows in years 0, 1, 2, and 3? what is NPV?
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