Question

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.97 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 $2209946 in annual sales, with costs of $856923. If the tax rate is 37 percent and the required return on the project is 10 percent, what is the project's NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456.78 should be entered as 123457.)

Answer 1

NPV=-2.97*10^6+(2209946-856923-2.97/3*10^6)*(1-37%)/1.1+(2209946-856923-2.97/3*10^6)*(1-37%)/1.1^2+(2209946-856923-2.97/3*10^6)*(1-37%)/1.1^3=-$2401246