Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Please help me solve this question using Excel. To Find What the project's net cash flow is for Year 0, 1, 2 and 3 and the project's NPV.
![Problem 9-12 NPV and Modified ACRS [LO 2]
Esfandairi Enterprises is considering a new three-year expansion project that
requires an initial fixed asset investment of $2,330,000. The fixed asset falls
into the three-year MACRS class (MACRS schedule). The project is estimated
to generate $1,735,000 in annual sales, with costs of $640,000. The project
requires an initial investment in net working capital of $300,000, and the
fixed asset will have a market value of $255,000 at the end of the project.
a. If the tax rate is 25 percent, what is the project's Year O net cash flow?
Year 1? Year 2? Year 3?
Note: A negative answer should be indicated by a minus sign. Do not
round intermediate calculations and round your answers to two
decimal places, e.g., 32.16.
b. If the required return is 9 percent, what is the project's NPV?
Note: Do not round intermediate calculations and round your answer to
two decimal places, e.g., 32.16.
a. Year 0 cash flow
Year 1 cash flow
Year 2 cash flow
Year 3 cash flow
b. NPV](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F483c3d17-1621-47af-bfd2-86acecf64938%2Fa6fa3c91-dcb5-469f-b5e2-d3489c4ed4ca%2Ff6q8318_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 9-12 NPV and Modified ACRS [LO 2]
Esfandairi Enterprises is considering a new three-year expansion project that
requires an initial fixed asset investment of $2,330,000. The fixed asset falls
into the three-year MACRS class (MACRS schedule). The project is estimated
to generate $1,735,000 in annual sales, with costs of $640,000. The project
requires an initial investment in net working capital of $300,000, and the
fixed asset will have a market value of $255,000 at the end of the project.
a. If the tax rate is 25 percent, what is the project's Year O net cash flow?
Year 1? Year 2? Year 3?
Note: A negative answer should be indicated by a minus sign. Do not
round intermediate calculations and round your answers to two
decimal places, e.g., 32.16.
b. If the required return is 9 percent, what is the project's NPV?
Note: Do not round intermediate calculations and round your answer to
two decimal places, e.g., 32.16.
a. Year 0 cash flow
Year 1 cash flow
Year 2 cash flow
Year 3 cash flow
b. NPV
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