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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.
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| a. |
If the tax rate is 24 percent, what is the project’s Year 0 net
cash flow? Year 1? Year 2? Year 3? (A
negative answer should be indicated by a minus sign.
Do not round intermediate calculations and enter your
answers in dollars, not millions of dollars, e.g.,
1,234,567.) |
| b. |
If the required return is 11 percent, what is the project's
NPV? (Do not round intermediate calculations and enter your
answers in dollars, not millions of dollars, rounded to two decimal
places, e.g., 1,234,567.89.) |
Answer is complete but not entirely correct.
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|
|
| a. |
Year 0 cash flow |
$-2,820,000selected answer correct |
|
Year 1 cash flow |
$1,414,040selected answer correct |
|
Year 2 cash flow |
$842,840selected answer correct |
|
Year 3 cash flow |
$4,028,400selected answer
incorrect |
| b. |
NPV |
$136,040.00selected answer
incorrect |
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