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Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed...

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Finance

Down Under Boomerang, Inc., is considering a new 3-yearexpansion project that requires an initial fixed asset investmentof $2.3 million. The fixed asset will be depreciated straight-lineto zero over its 3-year tax life, after which it will be worthless.The project is estimated to generate $1,720,000 in annual sales,with costs of $630,000. The tax rate is 22 percent and the requiredreturn is 11 percent. What is the project’s NPV?

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Solution The NPV of the project is    See Answer
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Down Under Boomerang, Inc., is considering a new 3-yearexpansion project that requires an initial fixed asset investmentof $2.3 million. The fixed asset will be depreciated straight-lineto zero over its 3-year tax life, after which it will be worthless.The project is estimated to generate $1,720,000 in annual sales,with costs of $630,000. The tax rate is 22 percent and the requiredreturn is 11 percent. What is the project’s NPV?

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