Determine the ocf for each year of this project

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Reference no: EM131992329

Stake Technology Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $1, 550,000.

The fixed asset falls into Class 10 for tax purposes (CCA rate of 30 percent per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $1, 900,000 in annual sales, with costs of $590,000. The tax rate is 24 percent.

a) What is the OCF for each year of this project?

b) Now suppose the required return on the project is 15 percent What is the projects NPV?

c) Finally, suppose the project requires an initial investment in net working capital of $240,000 and the fixed asset will have a market value of $400,000 at the end of the project. What is the projects new NPV?

Reference no: EM131992329

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