Cochrane, Inc., is considering a new three-year expansion project that requires an initialfixed asset investment of $2.55 million. The fixed asset falls into the three-year MACRSclass (MACRS Table). The project is estimated to generate $2,300,000 in annual sales,with costs of $1,290,000. The project requires an initial investment in net working capitalof $165,000, and the fixed asset will have a market value of $190,000 at the end of theproject. Assume that the tax rate is 35 percent and the required return on the project is 7percent.Requirement 1:What is the net cash flow of the project for the following years? (Do not include thedollar signs ($).Negative amounts should be indicated by a minus sign.Enter youranswers in dollars, not millions of dollars (e.g., 1,234,567).Round your answers to 2decimal places (e.g., 32.16).)YearO123NPVCash FlowRequirement 2:What is the NPV of the project? (Do not include the dollar sign ($). Enter your answerin dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimalplaces (e.g., 32.16).)

Cochrane, Inc.'s proposed three-year expansion project involves an initial outlay of $2.55 million…

Answered: Cochrane, Inc., is considering a new…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Amalgamated Industries is considering a 4- year project. The project is expected to generate operating cash flows of $11 million, $14 million, $16 million, and $9 million over the four years, respectively. It will require initial capital expenditures of $41 million dollars and an intitial investment in NWC of $24 million. The firm expects to generate a $11 million after tax salvage value from the sale of equipment when the project ends, and it expects to recover 100% of its nwc investments. Assuming the firm requires a return of 10% for projects of this risk level, what is the project's IRR? Question 3 options: 9.59% 9.22% 8.95% 9.41% 9.69%
Amalgamated Industries is considering a 4- year project. The project is expected to generate operating cash flows of $3 million, $16 million, $18 million, and $14 million over the four years, respectively. It will require initial capital expenditures of $35 million dollars and an initial investment in NWC of $6 million. The firm expects to generate a $6 million after tax salvage value from the sale of equipment when the project ends, and it expects to recover 100% of its nw investments. Assuming the firm requires a return of 15% for projects of this risk level, what is the project's IRR? A. 16.16% B. 16.47% C. 15.39% D. 16.00% E. 15.70%
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Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.37 million. The fixed asset qualifies for 100 percent bonus depreciation. The project is estimated to generate $1,765,000 in annual sales, with costs of $664,000. The project requires an initial investment in net working capital of $360,000, and the fixed asset will have a market value of $345,000 at the end of the project. a. If the tax rate is 21 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) b. If the required return is 11 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.)
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