Determine the projects year 0 net cash flow

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Reference no: EM131999205

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $1.242 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 $96, 600.

The project requires an initial investment in net working capital of $138,000. The project is estimated to generate $1, 104,000 in annual sales, with costs of $441, 600. The tax rate is 31 percent and the required return on the project is 16 percent.

(a) What is the project's year 0 net cash flow? -1, 380,000

(b) What is the project's year 1 net cash flow?

(d) What is the project's year 3 net cash flow?

(e) What is the NPV?

Reference no: EM131999205

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