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Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.968 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 $386,400. The project requires an initial investment in net working capital of $552,000. The project is estimated to generate $4,416,000 in annual sales, with costs of $1,766,400. The tax rate is 31 percent and the required return on the project is 13 percent.
(a) What is the project's year 0 net cash flow?
(b) What is the project's year 1 net cash flow?
(c) What is the project's year 2 net cash flow?
(d) What is the project's year 3 net cash flow?
(e) What is the NPV?
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During 2014, Ephraim Corporation reported revenues of $891,640 and profits of $91,486. Fixed costs were $332,043 and 44,582 units were sold. If costs and prices are expected to stay the same in 2015, and Ephraim expects to sell 45,000 units, what wil..
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