Chapter 9,5

H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,400,000. 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 $2,250,000 in annual sales, with costs of $1,240,000. Assume the tax rate is 30 percent and the required return on the project is 10 percent. What is the projects NPV?

Net Present Value: