Question

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.41 million. The fixed asset falls into the three-year MACRS class (MACRS schedule). 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 rate is 23 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3?

Answer #1

Quad Enterprises is considering a new three-year expansion
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...

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