If the firms marginal tax rate is 35 and its wacc is 15


Bush Boomerang, Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $2.1 million. The asset will be depreciated on a straight-line basis over its three-year life; the expected salvage value at the end of year 3 is $325,000. The project requires an initial investment in net working capital of $275,000. The project is expected to generate $1,900,000 in incremental annual sales, with $850,000 in incremental costs. If the firm’s marginal tax rate is 35% and its WACC is 15%, forecast the project’s total cash flow stream and determine the NPV. Interpret your answer in words.

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Financial Management: If the firms marginal tax rate is 35 and its wacc is 15
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