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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...

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Finance

Quad Enterprises is considering a new three-year expansionproject that requires an initial fixed asset investment of $2.32million. The fixed asset will be depreciated straight-line to zeroover its three-year tax life, after which time it will beworthless. The project is estimated to generate $1.735 million inannual sales, with costs of $650,000. The project requires aninitial investment in net working capital of $250,000, and thefixed asset will have a market value of $180,000 at the end of theproject. The tax rate is 21 percent.

a.What is the project’s Year 0 net cash flow? Year 1? Year 2?Year 3? (Do not round intermediate calculations. Enter youranswers in dollars, not millions of dollars, e.g., 1,234,567. Anegative answer should be indicated by a minus sign.)
b.

If the required return is 12 percent, what is the project's NPV?(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

Year 0: _____

Year 1: _____

Year 2: _____

Year 3: _____

NPV: ______

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