Keiper, Inc., is considering a new three-year expansion project that requires an
ID: 2714903 • Letter: K
Question
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 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 $2,110,000 in annual sales, with costs of $805,000. The tax rate is 35 percent and the required return on the project is 12 percent. What is the project’s NPV? (Round your answer to 2 decimal places. (e.g., 32.16))
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 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 $2,110,000 in annual sales, with costs of $805,000. The tax rate is 35 percent and the required return on the project is 12 percent. What is the project’s NPV? (Round your answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
Ans) NPV 29347.5
Calculation for Inflow Sale 2110000 Cost 805000 Net Inflow 1305000 Dep 2790000/3 930000 Net Inflow after dep 375000 tax 35% 131250 Net Inflow after tax 243750 Add dep 930000 Inflow After dep 1173750 PVAF for three year at@12 2.402 Present value 2819347.5 Less cost 2790000 NPV 29347.5Related Questions
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