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Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.214 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 $172,200. The project requires an initial investment in net working capital of $246,000. The project is estimated to generate $1,968,000 in annual sales, with costs of $787,200. The tax rate is 34 percent and the required return on the project is 9 percent. (a) What is the project's year 0 net cash flow? (b) What is the project's year 1 net cash flow? (c) What is the project's year 2 net cash flow? (d) What is the project's year 3 net cash flow? (e) What is the NPV?

Financial Management, Finance

  • Category:- Financial Management
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