H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 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 $2.23 million in annual sales, with costs of $1.25 million. Assume the tax rate is 23 percent and the required return on the project is 14 percent. What is the project's NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Net present value $ -15,396.33

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
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H. Cochran, Inc., is considering a new three-year expansion project that requires an
initial fixed asset investment of $2.15 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 $2.23 million in annual sales, with costs of $1.25 million. Assume
the tax rate is 23 percent and the required return on the project is 14 percent. What is
the project's NPV? (A negative answer should be indicated by a minus sign. Do not
round intermediate calculations and round your answer to 2 decimal places, e.g.,
32.16.)
Answer is complete but not entirely correct.
Net present value $
-15,396.33
Transcribed Image Text:H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 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 $2.23 million in annual sales, with costs of $1.25 million. Assume the tax rate is 23 percent and the required return on the project is 14 percent. What is the project's NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Net present value $ -15,396.33
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