Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,130,000. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,160,000 in annual sales, with costs of $1,150,000. The project requires an initial investment in net working capital of $151,000, and the fixed asset will have a market value of $176,000 at the end of the project. Assume that the tax rate is 30 percent and the required return on the project is 14 percent. What is the net cash flow of the project for the following years? NPV of project????
| Annual Sale | 2160000 | |
| Less: Cost | 1150000 | |
| 1010000 | ||
| Less: Tax | 303000 | |
| Profit After Tax | 707000 |
| Value | Tax Rate | Depriciatin | Total Dep | Remaining Value |
| 2130000 | 33.33% | 709929 | 709929 | 1420071 |
| 2130000 | 45.45% | 968085 | 1678014 | 451986 |
| 2130000 | rmaining | 275986 | 1954000 | 176000 |
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Initital Investment | -2130000 | |||
| -151000 | ||||
| PAT | 707000 | 707000 | 707000 | |
| Add:DTS Depri*Tax rate |
212978.7 | 290425.5 | 82795.8 | |
| cash flow After DTS | -2281000 | 919978.7 | 997425.5 | 789795.8 |
| Add:Realese of working Capital | 151000 | |||
| Add: Salvage Value | 176000 | |||
| Net Cash Flow | -2281000 | 919978.7 | 997425.5 | 1116796 |
| PV Factor@14 | 1 | 0.877193 | 0.76946753 | 0.674972 |
| PV OF cash Flow | -2281000 | 806998.86 | 767486.534 | 753805.4 |
| NPv | 47290.74838 | |||
