Considering new three-year expansion project

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Reference no: EM131020229

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,040,000 in annual sales, with costs of $743,000. The project requires an initial investment in net working capital of $260,000, and the fixed asset will have a market value of $280,000 at the end of the project.

a) If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (MACRS schedule)

b) If the required return is 15 percent, what is the project's NPV?

Reference no: EM131020229

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