Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.27 million. The fixed asset qualifies for 100 percent bonus depreciation. The project is estimated to generate $1,800,000 in annual sales. with costs of $692,000. The project requires an initial investment in net working capital of $430,000, and the fixed asset will have a market value of $450,000 at the end of the project. a. If the tax rate is 23 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (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.) b. If the required return is 10 percent, what is the project's NPV? (Do not round Intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) a. Year 0 cash flow a. Year 1 cash flow a. Year 2 cash flow a. Year 3 cash flow b. NPV
Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.27 million. The fixed asset qualifies for 100 percent bonus depreciation. The project is estimated to generate $1,800,000 in annual sales. with costs of $692,000. The project requires an initial investment in net working capital of $430,000, and the fixed asset will have a market value of $450,000 at the end of the project. a. If the tax rate is 23 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (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.) b. If the required return is 10 percent, what is the project's NPV? (Do not round Intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) a. Year 0 cash flow a. Year 1 cash flow a. Year 2 cash flow a. Year 3 cash flow b. NPV
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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Transcribed Image Text:Esfandairi Enterprises is considering a new 3-year expansion project that requires an
initial fixed asset investment of $2.27 million. The fixed asset qualifies for 100 percent
bonus depreciation. The project is estimated to generate $1,800,000 in annual sales.
with costs of $692,000. The project requires an initial investment in net working capital
of $430,000, and the fixed asset will have a market value of $450,000 at the end of the
project.
a. If the tax rate is 23 percent, what is the project's Year O net cash flow? Year 1? Year 2?
Year 3? (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.)
b. If the required return is 10 percent, what is the project's NPV? (Do not round
Intermediate calculations and enter your answer in dollars, not millions of dollars,
rounded to two decimal places, e.g., 1,234,567.89.)
a. Year 0 cash flow
a. Year 1 cash flow
a. Year 2 cash flow
a. Year 3 cash flow
b. NPV
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