Question: A company is trying to decide whether it should accept or reject a new 3-year project. If accepted, the project requires an immediate investment into
| A company is trying to decide whether it should accept or reject a new 3-year project. If accepted, the project requires an immediate investment into fixed assets in the amount of $2.9 million. These fixed assets fall into the 3-year MACRS class (MACRS Table). At the end of the project they are expected to have a market value of $226,800, and this will take place after 3 years since the launch of the project. It would also be necessary to invest into cash and other types of net working capital in the amount of $324,000. The company believes that the project will be able to generate $2,592,000 in annual sales revenues, and that the annual costs of goods sold will equal $1,036,800. The corporate tax rate is 32 percent. The annual rate of return that is required for this project is 13 percent. (Do not round your intermediate calculations.) |
| Required: | |
| (a) | What is the project's year 0 total cash flow? |
| (Click to select) -1,298,496 -3,062,800 -2,901,600 -3,224,000 -1,230,155 | |
| (b) | What is the project's estimated year 1 total cash flow? |
| (Click to select) 1,230,155 1,503,522 1,366,838 1,298,496 1,435,180 |
| (c) | What is the project's estimated year 2 total cash flow? |
| (Click to select) 1,470,032 1,435,180 1,230,155 1,543,534 1,396,530 |
| (d) | What is the project's estimated year 3 total cash flow? |
| (Click to select) 1,829,060 1,567,765 1,654,864 1,741,962 1,435,180 |
| (e) | Based on the above, calculate the Net Present Value of this project. |
| (Click to select) 6,451,387 289,018 361,314 326,904 344,108.96 |
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