Question
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 million. The fixed asset falls into
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 million. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2.23 million in annual sales, with costs of $1.25 million. The project requires an initial investment in net working capital of $150,000, and the fixed asset will have a market value of $185,000 at the end of the project. Assume that the tax rate is 23 percent and the required return on the project is 14 percent. |
a. | What is the net cash flow of the project for each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
b. | What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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