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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?

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Asset investment $2,180,000
Estimated annual sales $1,645,000
Costs $610,000
Tax rate 21%
Project and asset life 3
Required return 12%

Sagot :

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