Chapter 6, Problem 3QAP

Calculating Project NPV Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $1.42 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which it will be worthless. The project is estimated to generate $1.09 million in annual sales, with costs of $475,000. The tax rate is 25 percent and the required return is 12 percent. What is the project’s NPV?