Question:
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.754 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $2,448,000 in annual sales, with costs of $979,200. If the tax rate is 31 percent and the required return on the project is 9 percent, what is the NPV for this project?