What is the project net cash flow

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Question - Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.27 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,800,000 in annual sales, with costs of $710,000. The project requires an initial investment in net working capital of $430,000, and the fixed asset will have a market value of $450,000 at the end of the project.

a. If the tax rate is 23 percent, what is the project's Year 0 net cash flow? Year 1? Year 2? Year 3?

b. If the required return is 10 percent, what is the project's NPV?

Reference no: EM133047212

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