Expansion project-requires initial fixed asset investment

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Reference no: EM131841886

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.724 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 $445,200. The project requires an initial investment in net working capital of $636,000. The project is estimated to generate $5,088,000 in annual sales, with costs of $2,035,200. The tax rate is 32 percent and the required return on the project is 8 percent.

Required:

(a) What is the project's year 0 net cash flow?

(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: EM131841886

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