Question

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.1 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 $2,150,000 in annual sales, with costs of $1,140,000. Assume the tax rate is 35 percent and the required return on the project is 14 percent.

Required:

What is the project’s NPV? (Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Enter your answer in dollars (e.g., 1,234,567.89), not millions of dollars. Round your answer to 2 decimal places (e.g., 32.16).)

Answer 1