1. Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 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 2.19 million in annual sales, with costs of $815k,. If tax rate is 35%, what is the OCF for this project?
2. In the previous problem, suppose the required return on the project is 12%, what is the project's npv?
3. In the previous problem, suppose the project requires an initial investment in net working capital of $300k, and the fixed asset will have a market value of $210k at the end of the project. What is the project's Year 0 net cash flow now? Year 2? Year 3? What is the new NPV?