1. Business
  2. Finance
  3. quad enterprises is considering a new threeyear expansion project that...

Question: quad enterprises is considering a new threeyear expansion project that...

Question details

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,810,000 in annual sales, with costs of $700,000. The project requires an initial investment in net working capital of $450,000, and the fixed asset will have a market value of $480,000 at the end of the project.

  

a.

If the tax rate is 25 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3?

b. If the required return is 12 percent, what is the project's NPV?
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution