What is the project net cash flow

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Question - Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate $1,720,000 in annual sales, with costs of $628,000. The project requires an initial investment in net working capital of $270,000, and the fixed asset will have a market value of $210,000 at the end of the project.

Required -

a. If the tax rate is 22 percent, what is the project's Year 0 net cash flow? Year 1? Year 2? Year 3?

b. If the required return is 10 percent, what is the project's NPV?

Reference no: EM133041564

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