Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $6.426 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $499,800. The project requires an initial investment in net working capital of $714,000. The project is estimated to generate $5,712,000 in annual sales, with costs of $2,284,800. The tax rate is 23 percent and the required return on the project is 9 percent. What is the project's Year 3 net cash flow? What is the NPV?
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $6.426 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $499,800. The project requires an initial investment in net working capital of $714,000. The project is estimated to generate $5,712,000 in annual sales, with costs of $2,284,800. The tax rate is 23 percent and the required return on the project is 9 percent. What is the project's Year 3 net cash flow? What is the 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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Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $6.426 million. The fixed asset will be
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