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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,795,000 in annual sales, with costs of $688,000. The project requires an initial investment in net working capital of $420,000, and the fixed asset will have a market value of $435,000 at the end of the project. a. If the tax rate is 22 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

Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,795,000 in annual sales, with costs of $688,000. The project requires an initial investment in net working capital of $420,000, and the fixed asset will have a market value of $435,000 at the end of the project. a. If the tax rate is 22 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

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...
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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,795,000 in annual sales, with costs of $688,000. The project requires an initial investment in net working capital of $420,000, and the fixed asset will have a market value of $435,000 at the end of the project. a. If the tax rate is 22 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 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
Transcribed Image Text:Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,450,000. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,795,000 in annual sales, with costs of $688,000. The project requires an initial investment in net working capital of $420,000, and the fixed asset will have a market value of $435,000 at the end of the project. a. If the tax rate is 22 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 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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