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

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Finance

Down Under Boomerang, Inc., is considering a new 3-yearexpansion project that requires an initial fixed asset investmentof $2.37 million. The fixed asset falls into the 3-year MACRS class(MACRS schedule). The project is estimated to generate $1,765,000in annual sales, with costs of $664,000. The project requires aninitial investment in net working capital of $360,000, and thefixed asset will have a market value of $345,000 at the end of theproject.

a.

If the tax rate is 21 percent, what is the project’s Year 0 netcash flow? Year 1? Year 2? Year 3?

b.If the required return is 11 percent, what is the project'sNPV?

Answer & Explanation Solved by verified expert
4.2 Ratings (836 Votes)
operating cash flow OCF in each year income after tax depreciationbook    See Answer
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