Question

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. 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 $2,190,000 in annual sales, with costs of $815,000. The tax rate is 21 percent. If the required return is 12 percent, what is the project's NPV?

Answer 1

In cell D16
=D7
=2190000

In cell D17
=D8
=815000

In cell D18
=D6/D10
=2900000/3
=966666.67

In cell D19
=D16-D17-D18
=2190000-815000-966666.67
=408333.33

In cell D20
=D19*D9
=408333.33*21%
=85749.999300

In cell D21
=D19-D20
=408333.33-85749.999300
=322583.330700

In cell D23
=D21+D18
=322583.330700+966666.67
=1289250.000700

In cell D25
=NPV(D11,{-D6;D23;D23;D23})*(1+D11)
=906560.96255467