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Cochrane, Inc., is considering a new three-year expansion project that

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Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,550,000. 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 $2,300,000 in annual sales, with costs of $1,290,000. Assume the tax rate is 35 percent and the required return on the project is 7 percent.;What is the project's NPV?;Additional Requirements;Level of Detail: Show all work;Other Requirements: I forgot to include this in the question: Here is another question I have. Sorry!;Kolby?s Korndogs is looking at a new sausage system with an installed cost of $801,000. This cost will be depreciated straight-line to zero over the project?s six-year life, at the end of which the sausage system can be scrapped for $112,000. The sausage system will save the firm $200,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $58,000.;Required;If the tax rate is 35 percent and the discount rate is 7 percent, what is the NPV of this project?

 

Paper#26087 | Written in 18-Jul-2015

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