Esfandiari Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,070,000 in annual sales, with costs of $767,000. The project requires an initial investment in net working capital of $290,000 and the fixed asset will have a market value of $265,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year 1 net cash flow? Year 2? Year 3? Table 8.3 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, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the required return is 13 percent, what is the project's NPV? Note: Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89. a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b. NPV
Esfandiari Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,070,000 in annual sales, with costs of $767,000. The project requires an initial investment in net working capital of $290,000 and the fixed asset will have a market value of $265,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year 1 net cash flow? Year 2? Year 3? Table 8.3 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, rounded to 2 decimal places, e.g., 1,234,567.89. b. If the required return is 13 percent, what is the project's NPV? Note: Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89. a. Year 0 cash flow Year 1 cash flow Year 2 cash flow 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
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Transcribed Image Text:Esfandiari Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million.
The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,070,000 in annual sales, with costs of
$767,000. The project requires an initial investment in net working capital of $290,000 and the fixed asset will have a market value of
$265,000 at the end of the project.
a. If the tax rate is 21 percent, what is the project's Year 1 net cash flow? Year 2? Year 3? Table 8.3
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, rounded to 2 decimal places, e.g., 1,234,567.89.
b. If the required return is 13 percent, what is the project's NPV?
Note: Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to
2 decimal places, e.g., 1,234,567.89.
a. Year 0 cash flow
Year 1 cash flow
Year 2 cash flow
Year 3 cash flow
b. NPV
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