NPV and Modified ACRS

Description

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Question

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.28 million. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,210,000 in annual sales, with costs of $1,200,000. The project requires an initial investment in net working capital of $156,000, and the fixed asset will have a market value of $181,000 at the end of the project. Assume that the tax rate is 35 percent and the required return on the project is 11 percent. Requirement 1: What is the net cash flow of the project for the following years? Requirement 2: What is the NPV of the project? Jan 17 2014 05:01 AM

 

Solution ID:609221 | This paper was updated on 26-Nov-2015

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