Question
You-Bee Enterprises, Inc. is considering a new three-year expansion project with the relevant cash flows below. Calculate the projects NPV and IRR. Should You-Bee accept
You-Bee Enterprises, Inc. is considering a new three-year expansion project with the relevant cash flows below. Calculate the projects NPV and IRR. Should You-Bee accept or reject this project based on your calculations? Please use the Excel template provided to answer this problem. The required return is 12%. The tax rate is 21%. The project requires an initial fixed asset investment of $2.32 million, and the fixed asset will have a market value of $180,000 at the end of the project (salvage value). The fixed asset falls into the three-year MACRS class. [This is the fixed asset part of the cash flow.] The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. [This is the OCF part of cash flow.] The project requires an initial investment in net working capital of $250,000, which will be fully recovered at the end of the project. [This is the change in net working capital part of cash flow.]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started