Question
In: Finance
5. Cochrane, Inc. is considering a new three-year expansion project that requires an initial fixed asset...
5. Cochrane, Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $2.40 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 $2,250,000 in annual sales, with costs of $1,240,000. The project requires an initial investment in net working capital of $160,000, and the fixed asset will have a market value of $185,000 at the end of the project. Assume that the tax rate is 30 percent and the required return on the project is 10 percent.
a. What are the net cash flows of the project?
b. What is NPV & IRR? Decision?
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jeff jeffy answered 3 months agoRelated Solutions
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project that requires an initial fixed asset investment of
$1,860,000. 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 $1,950,000 in
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initial investment in net working capital of $150,000, and the
fixed asset will have a market value of $175,000 at the end of...
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project that requires an initial fixed asset investment of $2.37
million. The fixed asset falls into the three-year MACRS class
(MACRS Table). The project is estimated to generate $2,240,000 in
annual sales, with costs of $1,230,000. The project requires an
initial investment in net working capital of $159,000, and the
fixed asset will have a market value of $184,000 at the end of the
project. Assume that the tax rate is 35...
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
Cochrane, Inc., is
considering a new three-year expansion project that requires an
initial fixed asset investment of $1,860,000. 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 $1,950,000 in annual sales, with costs of $1,060,000. The
project requires an initial investment in net working capital of
$150,000, and the fixed asset will have a market value of $175,000
at the end of...
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
Cochrane, Inc., is considering a new three-year expansion
project that requires an initial fixed asset investment of
$1,860,000. 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 $1,950,000 in
annual sales, with costs of $1,060,000. Assume the tax rate is 35
percent and the required return on the project is 14 percent.
Required:
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project that requires an initial fixed asset investment of
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zero over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,950,000 in
annual sales, with costs of $1,060,000. The project requires an
initial investment in net working capital of $150,000, and the
fixed asset will have a market value of $175,000 at the end of...
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