Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed...

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Down Under Boomerang, Inc., is considering a new 3-yearexpansion project that requires an initial fixed asset investmentof $2.41 million. The fixed asset will be depreciated straight-lineto zero over its 3-year tax life. The project is estimated togenerate $1,775,000 in annual sales, with costs of $685,000. Theproject requires an initial investment in net working capital of$380,000, and the fixed asset will have a market value of $375,000at the end of the project.
a. If the tax rate is 23 percent, what is the project’s Year 0 netcash flow? Year 1? Year 2? Year 3? (Do not roundintermediate calculations and enter your answers in dollars, notmillions of dollars, e.g., 1,234,567. A negative answer should beindicated by a minus sign.)
b.
If the required return is 9 percent, what is the project's NPV?(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

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3.7 Ratings (465 Votes)

a Projects Year 0 Year 1 Year 2 and Year 3 Cash Flow Years Cash Flow Year 0 2790000 Year 1 1024067 Year 2 1024067 Year 3 1692817 Calculate of Annual Cash Flow Annual Sales 1775000 Less Costs 685000 Less See Answer

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Down Under Boomerang, Inc., is considering a new 3-yearexpansion project that requires an initial fixed asset investmentof $2.41 million. The fixed asset will be depreciated straight-lineto zero over its 3-year tax life. The project is estimated togenerate $1,775,000 in annual sales, with costs of $685,000. Theproject requires an initial investment in net working capital of$380,000, and the fixed asset will have a market value of $375,000at the end of the project.a.If the tax rate is 23 percent, what is the project’s Year 0 netcash flow? Year 1? Year 2? Year 3? (Do not roundintermediate calculations and enter your answers in dollars, notmillions of dollars, e.g., 1,234,567. A negative answer should beindicated by a minus sign.)b.If the required return is 9 percent, what is the project's NPV?(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

a.	If the tax rate is 23 percent, what is the project’s Year 0 netcash flow? Year 1? Year 2? Year 3? (Do not roundintermediate calculations and enter your answers in dollars, notmillions of dollars, e.g., 1,234,567. A negative answer should beindicated by a minus sign.)
b.	If the required return is 9 percent, what is the project's NPV?(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)