2. Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,250,000. 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 $2,200,000 in annual sales, with costs of $1,190,000. The project requires an initial investment in net working capital of $155,000, and the fixed asset will have a market value of $180,000 at the end of the project. Assume that the tax rate is 40 percent and the required return on the project is 10 percent. Requirement 1: What are the net cash flows of the project for the following years? Year 0 1 2 3 Requirement 2: What is the NPV of the project? NPV Cash Flow

2. Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,250,000. 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 $2,200,000 in annual sales, with costs of $1,190,000. The project requires an initial investment in net working capital of $155,000, and the fixed asset will have a market value of $180,000 at the end of the project. Assume that the tax rate is 40 percent and the required return on the project is 10 percent. Requirement 1: What are the net cash flows of the project for the following years? Requirement 2: What is the NPV of the project