Question

Calculating Project NPV Down Under Boomerang, Inc., is considering a new three year expansion project that requires an initial fixed asset investment of $3,950,000. 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 $3,175,000 in annual sales, with costs of $1,455,000. The tax rate is 35 percent and the required return is 10 percent. What is the project's NPV?

Can you show solution in excel please.

Answer 1

YEAR 1 $3,175,000.00 $3,175,000.00 $3,175,000.00 annual sales less: less: $1,455,000.00 $1,455,000.00 $1,455,000.00 $1,316,666.67 costs $1,316,666.67 $1,316,666.67 $403,333.33 depreciation $403,333.33 $403,333.33 ЕВT less: $141,166.67 $141,166.67 $141,166.67 tax @35% $262,166.67 $262,166.67 $262,166.67 EAT add: $1,316,666.67 $1,316,666.67 $1,316,666.67 depreciation $1,578,833.33 $1,578,833.33 $1,578,833.33 OCF initial investment: -$3,950,000 plant -$3,950,000.00 $1,578,833.33 $1,578,833.33 $1,578,833.33 Cash flows 0.90909 0.82645 0.75131 pv @ 10% -$3,950,000.00 $1,435,303.03 $1,304,820.94 $1,186,200.85 PRESENT VALUE -$23,675.18 NPV Cash flows -$3,950,000.00 $1,578,833.33 $1,578,833.33 $1,578,833.33 -$23,675.18 year 0 year 1 year 2 year 3 NPV