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blackdeer492Lv1
28 Sep 2019
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 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 $2,280,000 in annual sales, with costs of $1,270,000. The project requires an initial investment in net working capital of $163,000, and the fixed asset will have a market value of $188,000 at the end of the project. Assume that the tax rate is 30 percent and the required return on the project is 8 percent.
What are the net cash flows for the following 3 years starting with 0?
What is the NPV of the project?
| Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 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 $2,280,000 in annual sales, with costs of $1,270,000. The project requires an initial investment in net working capital of $163,000, and the fixed asset will have a market value of $188,000 at the end of the project. Assume that the tax rate is 30 percent and the required return on the project is 8 percent. What are the net cash flows for the following 3 years starting with 0? What is the NPV of the project? |
Nestor RutherfordLv2
28 Sep 2019
