Question
Dingo Construction is considering a new three-year expansion project that requires an initial fixed asset investment of $1.8 million. The fixed asset will be depreciated
Dingo Construction is considering a new three-year expansion project that requires an initial fixed asset investment of $1.8 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 $1,920,000 in annual sales, with costs of $985,000. Dingo's tax rate is 30%.
(a) What are the annual OCF's for this project?
(b) Draw the timeline for this project. If the appropriate OCC (opportunity cost of capital is11.7%, what is the NPV (net present value) of the project?
(c) Should Dingo accept this project? Why or why not?
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Survey of Accounting
Authors: Thomas P. Edmonds, Frances M. McNair, Philip R. Olds, Bor Yi
3rd Edition
978-1259683794, 77490835, 1259683796, 9780077490836, 978-0078110856
