Question: Two Part Question A) A company is considering a new three-year expansion project that requires an initial fixed asset investment of $2.55 million. The fixed

Two Part Question

A) A company is considering a new three-year expansion project that requires an initial fixed asset investment of $2.55 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 $2,030,000 in annual sales, with costs of $725,000. The tax rate is 35 percent and the required return on the project is 15 percent. What is the projects NPV?

B) Next, please calculate the following with the given numbers.

Sales: $419,704

Costs: 273,056

Depreciation: 62,100

Taxes: 35%

1) What is the EBIT?

2) Net income?

3) OCF?

4) Depreciation tax shield?

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!

2. The roll-up schedule below outlines a maintenance project. After6 weeks on the project, the acual cost to date is $42,716.00. Basedon a review of the project, activities A, 8, and C are 100 compl...

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires initial fixed asset investment of $2.52 million. The fixed asset will be depreciated straight-line to zero...

Esfandairi Enterprises is considering a new three-year expansion project that requires initial fixed asset investment of $2.42 million. The fixed asset will be depreciat straight-line to zero over...

Quad Enterprises is considering a new threeyear expansion project that requires an fixed asset investment of $2.37 million. The fixed asset will be depreciated straight line to zero over its three...

H. Cochran, Inc., is considering a new three-year expansion prolect that requires Initial fixed asset Investment of $2,300,000. The fixed asset will be depreciated straight- line to zero over its...

considering a new three-year expansion project requiring an initial fixed asset investment of $1,500,000. The fixed assets will be depreciated straight-line to zero. The project is estimated to...

Esfandairi Enterprises is considering a new three-year expansion project that requirab initial fixed asset investment of \$2.34 million. The fixed asset falis itito the treeycu MACRS class (MACRS...

Question 1 3 Benek, Incorporated, is considering a new 1 0 - year expansion project with an initial fixed asset investment of $ 1 3 2 , 9 0 0 . The fixed asset will be depreciated straight - line to...

Quad Enterprises is considering a new three-year expansion project that re initial fixed asset investment of $2.37 million. The fixed asset will be depreciate line to zero over its three-year tax...

5.PGH Inc. is considering a new seven-year expansion project with an initial fixed asset investment of $3.87 million. The fixed asset will be depreciated straight-line to zero over its seven-year tax...

I am is considering a new seven-year expansion project with an initial fixed asset investment of $3.87 million. The fixed asset will be depreciated straight-line to zero over its seven-year tax life,...

What type of queries benefit from parallel processing? What are the benefits of parallel databases? How does Oracle utilize memory to speed up processes?

What do you think would be appropriate punishment for those found guilty of assault or indecent exposure in the Tailhook situation? Why?

Dagostino produces and sells handmade pasta. They specialize in traditional semolina pasta, as well as specialty Louisiana - themed shaped pasta. The company has budgeted to sell 7 5 0 , 0 0 0 units,...

In 2005 Google paid $1 billion for 5% stake in AOL in order to: a.Increase their bargaining power with host websites under the AdSense business model b.Prevent Microsoft Internet Explorer from...

How would you rate yourself against these criteria?

10. Other things equal, if the United States continually runs trade deficits, foreigners will own U.S. assets. LO27.6 a. More and more. b. Less and less. c. The same amount of.

1. Suppose Zeeland pegs its currency, the zee, at 1 zee = 36 grains of gold while Aeeland pegs its currency, the aeellar, at 1 aellar = 10 grains of gold. LO27.7 a. What would the exchange rate be...