Question

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 $3,250,000 in annual sales, with costs of $2,270,000. Assume the tax rate is 22 percent and the required return on the project is 10 percent. What is the project's NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Net present value

Answer 1

CReguirad Retism l0x) Calculaliam a NP Imitial uastmemt CYear o Cash Qutlaus 2.400.o00 mual Opcatian fixad Asset Cost Tan alih Asset $2.400,000 8,00,000 3

Nous Cash flau Calulatan a mual Yenr Aanual ales 3, 250 000 (2.270o00) 980.oo0 Casts Caing bf Depratiam omer amd Oapreciatian 800.00a) deu Lning bafere Jen 180.000 Fces 221. (180 podx227 39 600 ) 140. 400 800 000 ddDepaciation Cash flaus let 940. 400

Date Page no 2) Nmmual Coshflauss CJloक I+ Requinad Retm Year Porasamt aluaIo Cashlaus's (im ) Year 940 100 940,400 854 909 09 940,400 2 it10) 940,40o ,3 ७५७ .५०० 777, 190 o8 2 706 536 44 940 400 Tit 10 3 Bamt alua o Arnual Cahlaus's -2, 338, 63S 61 Net Brsemt alne CNPV) Nous ntial nstmamt NPV ual Castflaus' 2.400.00O 2.338,63S .61 $61,364.39 NPV ం #61.364.39 giat is