roblem 9-9 Calculating Project OCF [LO 2] Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,950,000. 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 $3,190,000 in annual sales, with costs of $2,210,000. If the tax rate is 21 percent, what is the OCF fo

roblem 9-9 Calculating Project OCF [LO 2] Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,950,000. 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 $3,190,000 in annual sales, with costs of $2,210,000. If the tax rate is 21 percent, what is the OCF fo

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Description: Problem 9-9 Calculating Project OCF [LO 2]Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,950,000. The fixed asset will be depreciated straight-line to zero over its three

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Chapter10: Project Cash Flows And Risk

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Problem 9-9 Calculating Project OCF [LO 2]

Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,950,000. 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 $3,190,000 in annual sales, with costs of $2,210,000. If the tax rate is 21 percent, what is the OCF for this project?

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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Book erences Problem 9-11 Calculating Project Cash Flow from Assets [LO 2] Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,290,000 in annual sales, with costs of $1,310,000. The project requires an initial investment in net working capital of $160,000, and the fixed asset will have a market value of $195,000 at the end of the project. Assume that the tax rate is 21 percent and the required return on the project is 10 percent. a. What are the net cash flows of the project each year? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. b. What is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.…
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