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Summer Tyme, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset will be
Summer Tyme, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. 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. The project requires an initial investment in net working capital of $300,000. The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. The tax rate is 35 percent and the required return on the project is 12 percent. The cash flow from assets in Year O is $ the cash flow from assets in Year 1 is $ . the cash flow from assets in Year 2 is $ ; and the cash flow from assets in Year 3 is $ 7. The NPV for this project is $ (Do not include the dollar signs ($). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))
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