Question
XYZ Corporation is considering a new three-year expansion project that has an initial fixed asset cost of $3 million .The project also requires an initial
XYZ Corporation is considering a newthree-year expansion projectthat has an initial fixed asset cost of$3 million.The project also requires an initial investment in net working capital of$200,000.The fixed asset will be depreciated straight-line tozero salvage valueover its three-year tax life, after which time it will be worth$175,000(MV3New= $175,000).The project is estimated to generate$1,650,000in annual sales, with costs of$650,000.XYZ's corporate tax rate isT = 40 percentand XYZ's cost of capitalk = 2.50%.What is the NPV of this project?[Note:You must first calculate the Initial Investment (I), theOCFt's, and theNOCFt's for the project in order to calculate the NPV.]
A - $60,753.62
B - $158,256.55
C - $343,976.44
D $139,246.38
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