Down Under Boomerang, Inc., is considering a new 3-year
expansion project that requires an initial fixed...
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Down Under Boomerang, Inc., is considering a new 3-yearexpansion project that requires an initial fixed asset investmentof $2.29 million. The fixed asset falls into the 3-year MACRS class(MACRS schedule). The project is estimated to generate $1,715,000in annual sales, with costs of $624,000. The project requires aninitial investment in net working capital of $260,000, and thefixed asset will have a market value of $195,000 at the end of theproject.
a.
If the tax rate is 21 percent, what is the project’s Year 0 netcash flow? Year 1? Year 2? Year 3? (A negative answershould be indicated by a minus sign.Do not roundintermediate calculations and enter your answers in dollars, notmillions of dollars, rounded to two decimal places, e.g.,1,234,567.89.)
b.
If the required return is 9 percent, what is the project's NPV?(Do not round intermediate calculations and enter youranswer in dollars, not millions of dollars, rounded to two decimalplaces, e.g., 1,234,567.89.)
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