Question
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.5 million. The fixed asset falls into
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.5 million. The fixed asset falls into the 3-year MACRS class (MACRS Table) and will have a market value of $428,400 after 3 years. The project requires an initial investment in net working capital of $612,000. The project is estimated to generate $4,896,000 in annual sales, with costs of $1,958,400. The tax rate is 30 percent and the required return on the project is 11 percent. (Do not round your intermediate calculations.) |
Required: | |
(a) | What is the project's year 0 net cash flow? |
-6,112,000 Correct |
(b) | What is the project's year 1 net cash flow? |
2,606,265 Correct |
(c) | What is the project's year 2 net cash flow? |
2,789,745 Correct |
(d) | What is the project's year 3 net cash flow? |
(e) | What is the NPV? |
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