Question: Problem 9-12 NPV and Modified ACRS [LO 2] Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of

Problem 9-12 NPV and Modified ACRS [LO 2]

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,490,000. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,280,000 in annual sales, with costs of $1,270,000. The project requires an initial investment in net working capital of $163,000, and the fixed asset will have a market value of $188,000 at the end of the project. Assume that the tax rate is 30 percent and the required return on the project is 8 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?

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