Determine the net cash flows of the project


Cochrane, Inc., is considering a new three-year expansion project which needs an initial fixed asset investment of $2,670,000. 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 make $2,340,000 in annual sales, with costs of $1,330,000. The project needs an initial investment in net working capital of $169,000, and fixed asset will have a market value of $194,000 at the end of the project. Suppose that the tax rate is 30 percent and the required return on project is 6 percent. Determine the net cash flows of the project for the years 0, 1, 2, and 3? What is the NPV of the project?

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Finance Basics: Determine the net cash flows of the project
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