H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,300,000. The fixed asset will be depreciated straight- line to zero over its three-year tax life. The project is estimated to generate $2,420,000 in annual sales, with costs of $1,430,000. The project requires an initial investment in net working capital of $182,000 and the fixed asset will have a market value of $217,000 at the end of the project. Assume that the tax rate is 23 percent and the required return on the project is 12 percent. a. What are the net cash flows of the project each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) b. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b. NPV H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,300,000. The fixed asset will be depreciated straight- line to zero over its three-year tax life. The project is estimated to generate $2,420,000 in annual sales, with costs of $1,430,000. The project requires an initial investment in net working capital of $182,000 and the fixed asset will have a market value of $217,000 at the end of the project. Assume that the tax rate is 23 percent and the required return on the project is 12 percent. a. What are the net cash flows of the project each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) b. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b. NPV
Expert Answer:
Answer rating: 100% (QA)
rate positively Computation of NPV year 0 1 2 3 i Initial investment 2300000 ii ... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
Students also viewed these accounting questions
-
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset falls into the three-year MACRS class....
-
A project requires an initial fixed asset investment of $600,000, which will be depreciated straight-line to zero over the six-year life of the project. The pre-tax salvage value of the fixed assets...
-
A five-year project has an initial fixed asset investment of $270,000, an initial NWC investment of $25,000, and an annual OCF of - $42,000. The fixed asset is fully depreciated over the life of the...
-
The table shows equivalent temperatures in degrees Celsius and degrees Fahrenheit. (a) Plot the data with Fahrenheit temperature on the x-axis and Celsius temperature on the y-axis. What type of...
-
What risks does a foreign affiliate of a multinational firm face in todays business world?
-
Consider the following regions R and vector fields F. a. Compute the two-dimensional divergence of the vector field. b. Evaluate both integrals in Greens Theorem and check for consistency. c. State...
-
Identify the use of technology to support sales activities
-
B-Mobile Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes B-Mobile to issue 70,000 shares of 5%, $ 100 par value cumulative...
-
Company A has 1,000 shares of $1 common stock. Owner A owns 60% and Owner B owns 40%. Its Equity Section of its BS looks like this: Common Stock $1,000 Paid in Capital $500 Retained Earnings $500...
-
Chicago investment firm is offering a new financial derivative called a windy put. The windy put is European and has a payoff at expiration equal to Max(0.75S T , 70-S T ), where S T is the price of...
-
The Dennis Company re net income of 70,000 on sales of 490,000. The company has average total assets of 800,000 and average total liabilities of 300,000. What is the company's return on equity ratio?
-
As measured in steel at room temperature, the speed of sound is approximately 5000 m/s. What is the wavelength of a sound wave of frequency 1.2 kHz in steel Explain.
-
The sun is 30 above the horizon. It makes a 60 m -long shadow of a tall tree. Part A How high is the tree? Express your answer in meters. h = Submit Request Answer t 0 ? m
-
Smith buys a perpetuity, which pays $8000 every 3 years with the first payment 5 years from now. Each payment is 3% more than the prior payment. Assume i = 0.06. Calculate the price (present value)...
-
New Jersey Mutual offers you a single premium annuity that will pay you $12,000 per year at the end of each of the next 15 years. If you must pay $109,296 today for this annuity, what is your...
-
A transformer has primary voltage of 440 volts, a secondary 11000 V. If the primary current is 600 amps what is the secondary current.
-
To empower others, an effective leader should ______. Multiple choice question. promote participation of employees reward employees on the basis of personal choice should provide basic training only...
-
Suppose that the laptop of Prob. 2.16 is placed in an insulating briefcase with a fully charged battery, but it does not go into sleep mode, and the battery discharges as if the laptop were in use....
-
You own a portfolio that is invested 15 percent in Stock X, 35 percent in Stock Y, and 50 percent in Stock Z. The expected returns on these three stocks are 9 percent, 15 percent, and 12 percent,...
-
A portfolio is invested 45 percent in Stock G, 40 percent in Stock J, and 15 percent in Stock K. The expected returns on these stocks are 11 percent, 9 percent, and 15 percent, respectively. What is...
-
Bell Buckle Mfg. is considering a rights offer. The company has determined that the ex rights price would be $71. The current price is $76 per share, and there are 29 million shares outstanding. The...
-
Define torsional section modulus.
-
An inverted \(T\)-beam of \(4 \mathrm{~m}\) span is simply supported at the ends. Its cross-section is 300 \(\mathrm{mm} \times 250 \mathrm{~mm} \times 10 \mathrm{~mm}\). If permissible stresses in...
-
A rolled steel joist \(400 \mathrm{~mm} \times 200 \mathrm{~mm} \times 20 \mathrm{~mm}\) is freely supported on a span of \(4 \mathrm{~m}\). The flanges are strengthened by two \(250 \mathrm{~mm}...
Study smarter with the SolutionInn App