Problem #$4$: Cash Flow from Fixed Assets $[$CFFA$].$

points$]$

Cochran, Inc., is considering a new three$-$year expansion project that requires an initial fixed asset investment of $$2,130,000.$ The fixed asset will be depreciated straight$-$line to zero over its three$-$year useful life. It

will be worthless at the end of three years. The project is estimated to generate $$2,160,000$ in annual sales, with fixed costs of $$1,150,000.$ The project requires an initial investment in net working capital of

$$151,000.$ Assume that the tax rate is $30$ percent and the required return on the project is $14$ percent.

What is the Cash Flow from Fixed Assets $[$CFFA$]$ for years $0,1,2,$ and $3?$

Year $0$:

Year $1$:

Year $2$:

Year $3$:

What is the Net Present Value $[$NPV$]$ using a discount rate of $14\%?$

What is the Internal Rate of Return $[$IRR$]?$

Should you invest in the project?

SHOWWORK! NO WORK $...$ NO POINTS.

I would recommend doing it like I showed you in class; that is build an income statement and show the yearly cash flows.