problem: XYZ Home, Inc., is considering a new 3 year expansion project that requires an initial fixed asset investment of 4.2 million dollars. The fixed asset will be depreciated straight line to zero over its 3 year tax life, after which time it will be worthless. The project is estimated to generate $3,100,000 in yearly sales, with costs of $990,000. If the tax rate is 35%, determine the OCF for this project?
Assume that the required return on the project is 12%. Determine the project’s NPV?
Assume the project requires and initial investment in net working capital of dollar 300,000, & the fixed asset will have a market value of dollar 210,000 at the end of the project. Determine the project’s year 0 net cash flow; Year 1/Year 2/Year 3 determines the new NPV?
Assume the fixed asset actually falls into the 3 year MACRS class. All the other details are the same. Estimate the project’s year 1 net cash flow now Year 2/ Year 3/ determine the new NPV?