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28 Sep 2019
Cochrane, Inc., is considering a new three-year expansion projectthat requires an initial fixed asset investment of $2.31 million.The fixed asset will be depreciated straight-line to zero over itsthree-year tax life, after which time it will be worthless. Theproject is estimated to generate $2,220,000 in annual sales, withcosts of $1,210,000. The project requires an initial investment innet working capital of $157,000, and the fixed asset will have amarket value of $182,000 at the end of the project. Assume that thetax rate is 30 percent and the required return on the project is 11percent.
What are the net cash flows of the project for the followingyears?
Year
0
1
2
3
Cochrane, Inc., is considering a new three-year expansion projectthat requires an initial fixed asset investment of $2.31 million.The fixed asset will be depreciated straight-line to zero over itsthree-year tax life, after which time it will be worthless. Theproject is estimated to generate $2,220,000 in annual sales, withcosts of $1,210,000. The project requires an initial investment innet working capital of $157,000, and the fixed asset will have amarket value of $182,000 at the end of the project. Assume that thetax rate is 30 percent and the required return on the project is 11percent.
What are the net cash flows of the project for the followingyears?
Year
0
1
2
3
Jamar FerryLv2
28 Sep 2019
