Please solve
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3.00 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life.
The project is estimated to generate $2,180,000 in annual sales, with costs of $875,000. The tax rate is 30 percent and the required return is 9 percent.
The project requires an initial investment in net working capital of $400,000, and the fixed asset will have a market value of $260,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations.
A negative answer should be indicated by a minus sign.) Years Cash Flow Year 0 $ Year 1 $ Year 2 $ Year 3 $ What is the NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $
Exactlly>
What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)
Type exact answer please:
| Years |
Cash Flow |
| Year 0 |
$ |
| Year 1 |
$ |
| Year 2 |
$ |
| Year 3 |
$ |
What is the NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
|
Wrong answwer:
FYI...
|
CF |
tax saving on depreciation |
Net CF |
| 0 |
-3000000-400000 = -3400000 |
|
-3400000 |
| 1 |
2180000-875000 = 1305000 |
1000000*30% = 300000 |
1605000 |
| 2 |
2180000-875000 = 1305000 |
1000000*30% = 300000 |
1605000 |
| 3 |
2180000-875000 + 400000 + 260000= 1965000 |
1000000*30% = 300000 |
2265000 |
|
|
1.09 |
|
| Year |
CF |
PVF @ 9% |
PV |
| 0 |
-3400000 |
1 |
-3,400,000 |
| 1 |
1605000 |
0.917 |
1,472,477 |
| 2 |
1605000 |
0.842 |
1,350,896 |
| 3 |
2265000 |
0.772 |
1,748,996 |
|
|
|
|
|
|
NPV |
1,172,369 |
|
NPV $ |