Question

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life and is estimated to have a market value of $297260 at the end of the project. The project is estimated to generate $2043001 in annual sales, with costs of $843186. The project requires an initial investment in net working capital of $374861. If the tax rate is 35 percent and the required return on the project is 12 percent, what is the project's NPV?

Answer #1

Initial Investment = $2,670,000

Useful Life = 3 years

Annual Depreciation = Initial Investment / Useful Life

Annual Depreciation = $2,670,000 / 3

Annual Depreciation = $890,000

NWC Investment = $374,861

Salvage Value = $297,260

After-tax Salvage Value = $297,260*(1-0.35)

After-tax Salvage Value = $193,219

Annual OCF = (Annual Sales - Annual Costs)*(1-tax) + tax*Annual
Depreciation

Annual OCF = ($2,043,001 - $843,186)*(1-0.35) + 0.35*$890,000

Annual OCF = $1,091,379.75

Cash Flows:

Year 0 = -$2,670,000 - $374,861

Year 0 = -$3,044,861

Year 1 = $1,091,379.75

Year 2 = $1,091,379.75

Year 3 = $1,091,379.75 + $374,861 + $193,219

Year 3 = $1,659,459.75

NPV = -$3,044,861 + $1,091,379.75/1.12 + $1,091,379.75/1.12^2 +
$1,659,459.75/1.12^3

NPV = -$19,202.87

So, NPV of the project is -$19,202.87

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.52
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life and is estimated to have a market
value of $294584 at the end of the project. The project is
estimated to generate $2146553 in annual sales, with costs of
$809789. The project requires an initial investment in net working
capital of $360133. If the tax rate is...

Quad Enterprises is considering a new three year expansion
project that requires an initial fixed asset investment of 2.32
million. The fixed asset will be depreciated straight line to zero
over its three year tax life, after which time it will be
worthless. The project estimated to generate 1.735 million in
annual sales, with costs of 650,000. The tax rate is 21 percent and
the required return on the project is 12 percent. What is the
project's NPV?

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.29
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,810,000 in
annual sales, with costs of $720,000. The tax rate is 25 percent
and the required return on the project is 13 percent. What is the
project’s NPV?

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.18
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,730,000 in
annual sales, with costs of $640,000. The tax rate is 24 percent
and the required return on the project is 13 percent. What is the
project’s NPV?

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.57
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life and is estimated to have a market
value of $278995 at the end of the project. The project is
estimated to generate $2280865 in annual sales, with costs of
$895746. The project requires an initial investment in net working
capital of $369370. If the tax rate is...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.29
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,715,000 in
annual sales, with costs of $625,000. The tax rate is 21 percent
and the required return on the project is 10 percent. What is the
project’s NPV? (Do not round intermediate
calculations....

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.29
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,810,000 in
annual sales, with costs of $720,000. The tax rate is 25 percent
and the required return on the project is 13 percent. What is the
project's NPV? (Do not round intermediate calculations....

Quad Enterprises is considering a new three year expansion
project that requires an initial fixed asset investment of $2.29
million. The fixed asset will be depreciated straight-line to zero
over its three year tax life. The project is estimated to generate
$1,790,000 in annual sales, with the costs of $700,000. The project
requires an initial investment in net working capital of $410,000,
and the fixed asset will have a market value of $420,000 at the end
of the project. A.)...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.32
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1.735 million in
annual sales, with costs of $650,000. If the tax rate is 21
percent, what is the OCF for this project?

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $3
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life. The project is estimated to generate
$2,180,000 in annual sales, with costs of $875,000. The project
requires an initial investment in net working capital of $400,000,
and the fixed asset will have a market value of $260,000 at the end
of the project. If the tax rate...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 26 minutes ago

asked 48 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago