Question

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.41 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life and is estimated to have a market value of $213,186 at the end of the project. The project is estimated to generate $2,105,355 in annual sales, with costs of $883,025. The project requires an initial investment in net working capital of $377,259. If the tax rate is 35 percent and the required return on the project is 10 percent, what is the project's NPV?

Answer 1

G16 - fx =SUM(C16:F16) А 2 3 Less 4 5 Less 2,13,186.00 7 Less BEHOVOU year sales Costs savings depreciation EBT tax@35% EAT depreciation Operating Cash flows cost $ NWC $ After tax salvage value Cash flows | $ pv@10% present value $ Terminal value sale price Book value profit tax@35% After tax salvage value $ 21,05,355.00 $ 21,05,355.00 $ 21,05,355.00 $ 8,83,025.00 $ 8,83,025.00 $ 8,83,025.00 $ 12,22,330.00 $ 12,22,330.00 $ 12,22,330.00 $ 8,03,333.33 $ 8,03,333.33 $ 8,03,333.33 $ 4,18,996.67 $ 4,18,996.67 $ 4,18,996.67 $ 1,46,648.83 $ 1,46,648.83 $ 1,46,648.83 $ 2,72,347.83 $ 2,72,347.83 $ 2,72,347.83 $ 8,03,333.33 $ 8,03,333.33 $ 8,03,333.33 $ 10,75,681.17 $ 10,75,681.17 $ 10,75,681.17 -24,10,000.00 -3,77,259.00 $ 3,77,259.00 $ 1,38,570.90 -27,87,259.00 $ 10,75,681.17 $ 10,75,681.17 $ 15,91,511.07 1 0.9091 0.8264 0.7513 (27,87,259.00) $ 9,77,891.97 $ 8,88,992.70 $ 11,95,725.82 2,13,186.00 74,615.10 1,38,570.90 9 ADD $ 16 $ 2,75,351.49 INPV Depreciation 2410000/3 803333.33