.Down Under Boomerang

.Down Under Boomerang

Q2.Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an
initial fixed asset investment of $2.85 million. The fixed asset falls into the three-year MACRS class. The
project is estimated to generate $2,130,000 in annual sales, with costs of $815,000. The project requires
an initial investment in net working capital of $350,000, and the fixed asset will have a market value of
$235,000 at the end of the project.
If the tax rate is 34 percent and the required return is 11 percent, what is the project’s Year 1 net cash
flow? Year 2? Year 3? (Use MACRS) Link to MACRS http://lectures.mhhe.com/connect/0077479475/Table
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(Enter your answers in dollars, not millions of dollars, i.e. 1,234,567. Negative amounts should be
indicated by a minus sign. Do not round intermediate calculations and round your final answers
to 2 decimal places. (e.g., 32.16))
Years
Year 0
Year 1
Year 2
Year 3

Cash Flow
$
$
$
$

What is the NPV? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round
intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
NPV

$