Part 1 - summer tyme inc is considering a new three-year

Reference no: EM13610496

Part 1 - Summer Tyme, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. If the tax rate is 35 percent, what is the OCF for this project?

Part 2 - In the previous problem, suppose the required return on the project is 12 percent. What is the project's NPV?

Part 3- In the previous problem, suppose 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? What is the new NPV?

Reference no: EM13610496

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