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Calculate the net cash flows of the project for the following years?

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Calculate the net cash flows of the project for the following years?

Postby fyfe » Fri Apr 13, 2012 3:53 pm

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.61 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 $2,320,000 in annual sales, with costs of $1,300,000. The project requires an initial investment in net working capital of $167,000, and the fixed asset will have a market value of $192,000 at the end of the project. Assume that the tax rate is 40 percent and the required return on the project is 6 percent.What are the net cash flows of the project for the following years?
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