What is the projects npv

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Mangalore constructions is considering a new three-year expansion project that requires an initial fixed asset investment of $1.8 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 projhect is estimated to generate $2 million in annual sales, with costs of $1 million.

If the tax rate is 30%.

a) What is the OCF for this project?

b) Suppose the required return on the project is 14%. What is the projects NPV

c) Suppose the project requires an initial investment in net working capital of $100,000 and the fixed asset will have a market value of $180,000 at the end of the project. What is the project's year 0 net cash flow? Year 1? Year 2? Year3? What is the new NPV?

Reference no: EM132799526

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