What is the new npv

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Reference no: EM132200033

PhotoExpress, is considering a new three-year expansion project that requires an initial fixed asset investment of $4.2 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 $3,100,000 in annual sales, with costs of $990,000. The tax rate is 35 percent.

First, determine the operating cash flow.

Second, if the required return is 12% on the project, what is the projects NPV?

Third, suppose the project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $210,000 at the end of the project. What is the project's year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV?

Reference no: EM132200033

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