FYI!!! $29,112.75 IS NOT THE CORECT ANSWER Down Under Boomerang, Inc., is consid
ID: 2743623 • Letter: F
Question
FYI!!! $29,112.75 IS NOT THE CORECT ANSWER
Down Under Boomerang, 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 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 is 12 percent.
Down Under Boomerang, 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 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 is 12 percent.
Explanation / Answer
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fixed asset investment $ 2,790,000.00 project is estimated to generate $ 2,110,000.00 costs $ 805,000.00 required return or discount factor 12% Particulars 0 1 2 3 NPV fixed asset investment $ 2,790,000.00 project is estimated to generate $2,110,000.00 $2,110,000.00 $2,110,000.00 Depriciation $ 930,000.00 $ 930,000.00 $ 930,000.00 costs $ 805,000.00 $ 805,000.00 $ 805,000.00 EBIT and EBT as interest is not there $ (2,790,000.00) $ 375,000.00 $ 375,000.00 $ 375,000.00 Less : taxes @ 35% $ (976,500.00) $ 131,250.00 $ 131,250.00 $ 131,250.00 EAT $ (3,766,500.00) $ 243,750.00 $ 243,750.00 $ 243,750.00 Add: Depriciation $ - $ 930,000.00 $ 930,000.00 $ 930,000.00 NOPAT $ (3,766,500.00) $1,173,750.00 $1,173,750.00 $1,173,750.00 Discount Factor @ 12% $ 1.00 $ 0.89 $ 0.80 $ 0.71 Discounted Value $ (3,766,500.00) $1,047,991.07 $ 935,706.31 $ 835,452.07 $(947,350.55)Related Questions
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