Chauhan Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $1.96 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1.445 million in annual sales, with costs of $580,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent. What is the project's Year 0 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 enter your answers in dollars, not millions of dollars, e.g., 1,234,567. If the required return is 12 percent, what is the project's NPV? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.
Chauhan Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $1.96 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1.445 million in annual sales, with costs of $580,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent. What is the project's Year 0 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 enter your answers in dollars, not millions of dollars, e.g., 1,234,567. If the required return is 12 percent, what is the project's NPV? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...
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