USE CELLS A6 TO B10 FROM THE GIVEN INFORMATION TO COMPLETE THIS QUESTION. Esfandairi Enterprises is considering a new three-year expansion project thatrequires an initial fixed asset investment of $2.18 million. The fixed asset willbe depreciated straight-line to zero over its three-year tax life, after whichtime it will be worthless. The project is estimated to generate $1.645 millionin annual sales, with costs of $610,000. The tax rate is 21 percent. If therequired return is 12 percent, what is the project's NPV?Input area:Asset investmentEstimated annual salesCostsTax rateProject and asset lifeRequired returnOutput area:(Use cells A6 to B10 from the given information to complete this question.)SalesCostsDepreciation$2,180,000$1,645,000$610,000EBTTaxesNet incomeOCFNPV21%312%

Net Present Value is a method of taking investment decision. NPV = PV of Cash inflow - Initial…

Answered: USE CELLS A6 TO B10 FROM THE GIVEN…

Business

Accounting

USE CELLS A6 TO B10 FROM THE GIVEN INFORMATION TO COMPLETE THIS QUESTION.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 6P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

USE CELLS A6 TO B10 FROM THE GIVEN INFORMATION TO COMPLETE THIS QUESTION.

Esfandairi Enterprises is considering a new three-year expansion project that
requires an initial fixed asset investment of $2.18 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 $1.645 million
in annual sales, with costs of $610,000. The tax rate is 21 percent. If the
required return is 12 percent, what is the project's NPV?
Input area:
Asset investment
Estimated annual sales
Costs
Tax rate
Project and asset life
Required return
Output area:
(Use cells A6 to B10 from the given information to complete this question.)
Sales
Costs
Depreciation
$2,180,000
$1,645,000
$610,000
EBT
Taxes
Net income
OCF
NPV
21%
3
12%

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