Question

quad enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of 2.38 million.The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate 1,805,000 in annual sales, with costs of 696,000. The project requires an initial investment in net working capital of 444,000, and the fixed asset will have a market value of 465,000 at the end of the project.

a. If the tax rate is 24 percent, what is the project's Year 0 net cash flow? Year 1? Year 2? Year 3?

b. If the required return is 11 percent, what is the project's NPV?

Answer #1

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.38
million. The fixed asset qualifies for 100 percent bonus
depreciation in the first year. The project is estimated to
generate $1,805,000 in annual sales, with costs of $696,000. The
project requires an initial investment in net working capital of
$440,000, and the fixed asset will have a market value of $465,000
at the end of the project.
a.
If the tax...

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expansion project that requires an initial fixed asset investment
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depreciation in the first year.
The project is estimated to generate $1.735 million in annual sales
with costs of $650,000. The project requires an initial investment
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Quad Enterprises is considering a new three-year expansion
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depreciation in the first year. The project is estimated to
generate $1,800,000 in annual sales, with costs of $692,000. The
project requires an initial investment in net working capital of
$430,000, and the fixed asset will have a market value of $450,000
at the end of the project. a. If the tax rate...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.27
million. The fixed asset qualifies for 100 percent bonus
depreciation in the first year. The project is estimated to
generate $1,800,000 in annual sales, with costs of $692,000. The
project requires an initial investment in net working capital of
$430,000, and the fixed asset will have a market value of $450,000
at the end of the project.
a. If the tax rate...

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project that requires an initial fixed asset investment of $2.41
million. The fixed asset qualifies for 100 percent bonus
depreciation in the first year. The project is estimated to
generate $1,775,000 in annual sales, with costs of $672,000. The
project requires an initial investment in net working capital of
$380,000, and the fixed asset will have a market value of $375,000
at the end of the project.
a.
If the tax...

Quad Enterprises is considering a new three-year expansion project
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The fixed asset qualifies for 100 percent bonus depreciation in the
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annual sales, with costs of $684,000. 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
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The fixed asset falls into the 3-year MACRS class (MACRS Table) and
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requires an initial investment in net working capital of $282,000.
The project is estimated to generate $2,256,000 in annual sales,
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Quad Enterprises is considering a new 3-year expansion project
that requires an initial fixed asset investment of $1.296 million.
The fixed asset will be depreciated straight-line to zero over its
3-year tax life, after which time it will have a market value of
$100,800. The project requires an initial investment in net working
capital of $144,000. The project is estimated to generate
$1,152,000 in annual sales, with costs of $460,800. The tax rate is
25 percent and the required return...

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