Question: The Third Street Eatery is considering a 4 year expansion project that will require an initial fixed asset investment of $2.19 million. The fixed asset
The Third Street Eatery is considering a 4 year expansion project that will require an initial fixed asset investment of $2.19 million. The fixed asset will be depreciated straight-line to zero over its 4 year tax life, after which time it will have a market value of $430,000 . The project requires an initial investment in net working capital of $245,000 , which will be fully recovered when the project is terminated. Estimated sales are $2,305,000 per year, with costs of $956,000 . The tax rate is 19.0% and the required return for the project is 20.70%. Find the project's NPV. Ignore any bonus depreciation.
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