### Create an Account

Home / Questions / Incorrect answer second attempt Please solve Down Under Boomerang Inc is considering a n...

# Incorrect answer second attempt Please solve Down Under Boomerang Inc is considering a new threeyear expansion project that requires an initial fixed asset investment of

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of \$3.00 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate \$2,180,000 in annual sales, with costs of \$875,000. The tax rate is 30 percent and the required return is 9 percent. The project requires an initial investment in net working capital of \$400,000, and the fixed asset will have a market value of \$260,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) Years Cash Flow Year 0 \$ Year 1 \$ Year 2 \$ Year 3 \$ What is the NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV \$

Exactlly>

 What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

 Years Cash Flow Year 0 \$ Year 1 \$ Year 2 \$ Year 3 \$
 What is the NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Wrong answwer:

FYI...

 CF tax saving on depreciation Net CF 0 -3000000-400000 = -3400000 -3400000 1 2180000-875000 = 1305000 1000000*30% = 300000 1605000 2 2180000-875000 = 1305000 1000000*30% = 300000 1605000 3 2180000-875000 + 400000 + 260000= 1965000 1000000*30% = 300000 2265000
 1.09 Year CF PVF @ 9% PV 0 -3400000 1 -3,400,000 1 1605000 0.917 1,472,477 2 1605000 0.842 1,350,896 3 2265000 0.772 1,748,996 NPV 1,172,369
NPV

Apr 03 2020 View more View Less