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Business, 11.05.2021 17:40 AleciaCassidy

Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.33 million. The fixed asset falls into the 3-year MACRS class (MACRS schedule). The project is estimated to generate $1,735,000 in annual sales, with costs of $640,000. The project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $255,000 at the end of the project. Required:
a. If the tax rate is 25 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3?
b. If the required return is 9 percent, what is the project's NPV?

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