Calculating Project Cash Flow from Assets
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.484 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $193,200. The project requires an initial investment in net working capital of $276,000. The project is estimated to generate $2,208,000 in annual sales, with costs of $883,200. The tax rate is 32 percent and the required return on the project is 12 percent.
Required:
(a) What is the project's year 0 net cash flow?
(Click to select)-2,760,000 -3,036,000 -2,898,000 -2,484,000 -2,622,000
(b) What is the project's year 1 net cash flow?
(Click to select)1,165,824 1,107,533 1,049,242 1,224,115 1,282,406
(c) What is the project's year 2 net cash flow?
(Click to select)1,165,824 1,049,242 1,224,115 1,107,533 1,282,406
(d) What is the project's year 3 net cash flow?
(Click to select)1,415,880 1,651,860 1,573,200 1,730,520 1,494,540
(e) What is the NPV?
(Click to select)316,113 346,578 1,089,652 -502,015 330,075