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

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Down Under Boomerang, Inc. is considering a new three-yearexpansion project that requires an initial fixed asset investmentof $2.4 million. The fixed asset will be depreciated straight-lineto zero over its three-year tax life, after which it will beworthless. The project is estimated to generate $2,050,000 inannual sales, with costs of $950,000. The tax rate is 35% and therequired return is 12 percent. Calculate the projects NPV and IRR.Suppose that Down Under Boomerang is projected to grow at a rate of4% after year 3. What is the value of the firm? Now, suppose theproject requires an initial investment in net working capital of$285,000 and the fixed asset will have a market value of $225,000at the end of the project. What are the new NPV and IRR? Now whatis the value of the firm?

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Down Under Boomerang, Inc. is considering a new three-yearexpansion project that requires an initial fixed asset investmentof $2.4 million. The fixed asset will be depreciated straight-lineto zero over its three-year tax life, after which it will beworthless. The project is estimated to generate $2,050,000 inannual sales, with costs of $950,000. The tax rate is 35% and therequired return is 12 percent. Calculate the projects NPV and IRR.Suppose that Down Under Boomerang is projected to grow at a rate of4% after year 3. What is the value of the firm? Now, suppose theproject requires an initial investment in net working capital of$285,000 and the fixed asset will have a market value of $225,000at the end of the project. What are the new NPV and IRR? Now whatis the value of the firm?