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FinanceQ&A LibraryDown Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,720,000 in annual sales, with costs of $630,000. The project requires an initial investment in net working capital of $270,000, and the fixed asset will have a market value of $210,000 at the end of the project. a.If the tax rate is 22 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.)b.If the required return is 10 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. whar are Years 0,1,2,3 cash flow seperatelyb. What is the NPVQuestion

Asked Oct 28, 2019

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Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,720,000 in annual sales, with costs of $630,000. The project requires an initial investment in net working capital of $270,000, and the fixed asset will have a market value of $210,000 at the end of the project. |

a. |
If the tax rate is 22 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.) |

b. |
If the required return is 10 percent, what is the project's NPV? |

a. whar are Years 0,1,2,3 cash flow seperately

b. What is the NPV

1 Rating

Step 1

The initial investment cost of store is $2,300,000.

According to straight line depreciation, the annual depreciation is calculated below:

Step 2

a.

Cash outflow at the beginning of project is calculated below:

Step 3

When calculating operating gross profit, depreciation is deducted from revenue which will decrease the cash flow. So, it is needed to add b...

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