Q: Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30 percent per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. The project requires an initial investment in net working capital of $300,000 and the fixed asset will have a market value of $210,000 at the end of the project. If the tax rate is 35 percent,
1) What is the project’s year 0 net cash flow?
2) What is the project’s year 1 net cash flow?
3) What is the project’s year 2 net cash flow?
4) What is the project’s year 3 net cash flow?
5) If the required return is 12 percent, what is the project's NPV?