Question: Hello, I need help with this problem. I was able to get years 0-2 correct but I cant seem to get year 3 and the

Hello, I need help with this problem. I was able to get years 0-2 correct but I cant seem to get year 3 and the npv calculated correct. Please help!

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.61 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,050,000 in annual sales, with costs of $751,000. The project requires an initial investment in net working capital of $270,000, and the fixed asset will have a market value of $275,000 at the end of the project.

If the tax rate is 30 percent, what is the project's Year 1 net cash flow? Year 2? Year 3?Table 8.3.(Enter your answers in dollars, not millions of dollars. A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 1,234,567.89.)

Cash FlowYear 0$-2880000

-2880000 Correct

Year 1$1170274

1170274 Correct

Year 2$1257344

1257344 Correct

Year 3$1295262

1295262 Incorrect

If the required return is 15 percent, what is the project's NPV?(Enter your answer in dollars, not millions of dollars. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 1,234,567.89.)

NPV$-59981.64 Incorrect

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!