# Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of \$2.29 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate \$1,715,000 in annual sales, with costs of \$624,000. The project requires an initial investment in net working capital of \$260,000, and the fixed asset will have a market value of \$195,000 at the end of the project.  a.If the tax rate is 21 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.)b.If the required return is 9 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.)

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 Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of \$2.29 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate \$1,715,000 in annual sales, with costs of \$624,000. The project requires an initial investment in net working capital of \$260,000, and the fixed asset will have a market value of \$195,000 at the end of the project.

 a. If the tax rate is 21 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) b. If the required return is 9 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.)

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Step 1

a.)

Computation of net cash flows of year 0 to year 3:

Step 2

The cash outflow is as follows: help_outlineImage TranscriptioncloseF23 F A B C D E G H Cash outflow 12 Year Depreciation rateCash flows Depreciation (MACR 3-year) 0.3333 1091000 0.4445 1091000 0.1481 1091000 Cash out flow 1022173.97 1075650.05 ЕВT Тах PAT 13 -763257 -1017905 -339149 258916.97 57745.05 593962 29 327743 73095 751851 1 -68826.03 14 -15349.95 15 -157888.71 93311129 16 17 fullscreen
Step 3

Working note:

... help_outlineImage TranscriptioncloseF23 B C D F G A E н Cash outflow 12 Depreciation rate Cash flows Depreciation (MACR 3-year) 0.3333 0.4445 0.1481 Year ЕВIT Тах PAT E14+ F14 -E15+F15 -E16+ F16 Cash out flow G14-D14 |-G15-D15 G16-D16 13 |=E3*B14 -E3 B15 E3 B16 BS B8 =BS |=SUM(C14D14)--E14*B4 |-SUM(C15D15)E15-B4 -SUM(C16D16 E16 B4 14 1 15 2 16 3 17 fullscreen

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