Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.37 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $1,765,000 in annual sales, with costs of $675,000. The project requires an initial investment in net working capital of $360,000, and the fixed asset will have a market value of $345,000 at the end of the project.
|a.||If the tax rate is 21 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.)|
If the required return is 11 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
|Investment in Working Capital||(360,000.00)|
|Profit before tax||300,000.00||300,000.00||300,000.00|
|Operating Cash flow||1,027,000.00||1,027,000.00||1,027,000.00|
|Recovery of Working capital||360,000.00|
|After tax salvage value||272,550.00|
|PV of cash flows||(2,730,000.00)||925,225.23||833,536.24||1,213,448.66|
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