Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.40 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 project is estimated to generate $1,980,000 in annual sales, with costs of $675,000. The project requires an initial investment in net working capital of $200,000, and the fixed asset will have a market value of $310,000 at the end of the project. If the tax rate is 34 percent, what is the project's year 0 net cash flow? Year 1? Year 2? Year 3?
| Years |
Cash Flow |
| Year 0 |
$ |
| Year 1 |
$ |
| Year 2 |
$ |
| Year 3 |
$ |
|
If the required return is 18 percent, what is the project's NPV?