XYZ Corporation is considering a new three-year expansion project that has an initial fixed asset cost of
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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 investment in net working capital of $200,000. The fixed asset will be depreciated straight-line to zero salvage value over its three-year tax life, after which time it will be worth $175,000 (MV3New = $175,000). The project is estimated to generate $1,650,000 in annual sales, with costs of $650,000. XYZs corporate tax rate is T = 40 percent and XYZs cost of capital k = 2.50%. What is the NPV of this project? [Note: You must first calculate the Initial Investment (I), the OCFts, and the NOCFts for the project in order to calculate the NPV.]
$60,753.62
$158,256.55
$343,976.44
- $139,246.38
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