Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.38 million. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,805,000 in annual sales, with costs of $696,000. The project requires an initial investment in net working capital of $440,000, and the fixed asset will have a market value of $465,000 at the end of the project. a.If the tax rate is 24 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, rounded to two decimal places, e.g., 1,234,567.89.) b.lf the required return is 11 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.) 4 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 three-year expansion project that requires an initial fixed asset investment of $2.38 million. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,805,000 in annual sales, with costs of $696,000. The project requires an initial investment in net working capital of $440,000, and the fixed asset will have a market value of $465,000 at the end of the project. a.If the tax rate is 24 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, rounded to two decimal places, e.g., 1,234,567.89.) b.lf the required return is 11 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.) 4 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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Kk 217.
Transcribed Image Text:Esfandairi Enterprises is considering a new three-year expansion project that requires an
initial fixed asset investment of $2.38 million. The fixed asset falls into the three-year
MACRS class (MACRS schedule). The project is estimated to generate $1,805,000 in
annual sales, with costs of $696,000. The project requires an initial investment in net
working capital of $440,000, and the fixed asset will have a market value of $465,000 at
the end of the project.
a.If the tax rate is 24 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,
rounded to two decimal places, e.g., 1,234,567.89.)
b.lf the required return is 11 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
weeke
4
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