Reference no: EM132185318

All answers must be entered as a formula in excel

1. Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. The project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $210,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? The tax rate is 21 percent. If the required return is 12 percent, what is the project's NPV?

Asset investment                    $         2,900,000

Estimated annual sales          $         2,190,000

Costs                                      $            815,000

Net working capital                 $            300,000

Pretax salvage value              $            210,000

Tax rate                                                          21%

Project and asset life                                       3

Required return                                              12%

Complete the following analysis. Do not hard code values in your calculations. You must use the built-in Excel function to calculate the NPV.

Aftertax cash flow

Sales

Costs

Depreciation

EBT

Taxes

Net income

Capital spending

Net working capital

OCF

Net cash flow

NPV