Answer:
Years Cash Flow
Year 0 -$
3,240,000
Year 1 $
1,192,050
Year 2 $
1,304,106
Year 3 $
1,595,994
If the required return is 10 percent, what is the project's NPV?
using a financial calculator, NPV = $120,549.29
Explanation:
cash flow year 0 = $2,880,000 + $360,000 = $3,240,000
MACRS depreciation
33.33% x $2,880,000 = $960,000
44.45% x $2,880,000 = $1,280,160
14.81% x $2,880,000 = $399,840 (since salvage value is $240,000)
cash flow year 1 = [($2,140,00 - $823,000 - $960,000) x 0.65] + $960,000 = $1,192,050
cash flow year 2 = [($2,140,00 - $823,000 - $1,280,160) x 0.65] + $1,280,160 = $1,304,106
cash flow year 3 = [($2,140,00 - $823,000 - $399,840) x 0.65] + $399,840 + $240,000 + $360,000 = $1,595,994
