In the previous problem, suppose the project requires an initial investment in net working capital of $450,000 and the fixed asset will have a market value of $575,000 at the end of the project. What is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV?

Data from Previous Problem

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3.75 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3.07 million in annual sales, with costs of $1.51 million. The tax rate is 21 percent and the required return is 10 percent. What is the project’s NPV?