Dingo Construction is considering a new three-year expansion project that requires an initial fixed asset investment of $1.8 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 $1,920,000 in annual sales, with costs of $985,000. Dingo's tax rate is 30%.
(a) What are the annual OCF's for this project?
(b) Draw the timeline for this project. If the appropriate OCC (opportunity cost of capital is 11.7%, what is the NPV (net present value) of the project?
(c) Should Dingo accept this project? Why or why not?