Quad Enterprises is considering a new three-year expansion project that requires
ID: 2485161 • Letter: Q
Question
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.52 million. The fixed asset will be depreciated straight-line over its three-year tax life, and the fixed asset will have a market value of $294584 at the end of the project. The project is estimated to generate $2146553 in annual sales, with costs of $809789. The project requires an initial investment in net working capital of $360133. If the tax rate is 30 percent and the required return on the project is 12 percent, what is the project's NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456.78 should be entered as 123457.)Explanation / Answer
Particulars Year Cash Flows PVF @ 12% PV Cash Outflow 0 -25,20,000.00 1.00 -25,20,000.00 Net Working Capital 0 -3,60,133.00 1.00 -3,60,133.00 Annual Costs ( Net Of Tax) 1 to 3 -5,56,852.00 2.40 -13,37,447.13 Cash Inflows ( Net Of Tax) 1 to 3 15,02,587.10 2.40 36,08,913.70 Tax Saving On Depreciation 1 to 3 2,52,000.00 2.40 6,05,253.60 Working Capital 3 3,60,133.00 0.71 2,56,335.47 Sale of Asset ( Net Of Tax) 3 2,06,208.80 0.71 1,46,775.30 Net Present Value 3,99,697.93