D F H 2 3 Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated on a three-year MACRS schedule. The project is estimated to generate $2,190,000 in annual sales with costs of $815,000. The project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $210,000 at the end of the project What is the project's Year Onet cash flow? Year 12 Year 2? Year 3? The tax rate is 21 percent. If the required return is 12 percent, what is the project's NPV? 4 5 8 9 6 Asset investment 7 Estimated annual sales $ Costs Net working capital $ 10 Pretax salvage value 11 Tax rate 12 Project and asset life 13 Required return 14 MACRS percentages 15 Year 1 16 Year 2 17 Year 3 2,900,000 2,190,000 815,000 300,000 210,000 21% 3 12% 0.3333 0.4445 0 1481 D F 19 H E 20 Complete the following analysis. Do not hard code values in your calculations. You must use the built-in Excel function to calculate the NPV. 21 N 22 Sales 23 Costs 24 Depreciation 25 EBT 26 Taxes 27 Net income 28 29 Fixed asset book value 30 in three years 31 32 Aftertax salvage value 33 Sell equipment 34 Taxes 35 Aftertax cash flow 36 37 Capital spending 38 Net working capital 39 OCF 29 Fixed asset book value in three years 30 31 32 33 Aftertax salvage value Sell equipment Taxes Aftertax cash flow 34 35 36 38 37 Capital spending Net working capital 39 OCF Net cash flow 40 41 42 NPV 43