Expansion project-requires initial fixed asset investment

Assignment Help Financial Management

Reference no: EM131056845

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,430,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,260,000 in annual sales, with costs of $1,250,000. The project requires an initial investment in net working capital of $161,000, and the fixed asset will have a market value of $186,000 at the end of the project. Assume that the tax rate is 40 percent and the required return on the project is 8 percent.

Reference no: EM131056845

Questions Cloud

Two-sided test performed on the same data : If a one-sided test indicates that the null hypothesis can be rejected where α = 0.05, would a two-sided test performed on the same data set be significant at the 0.05 level? Why or why not?

Maturity bond-what rate of return does each bond offer : A 30-year maturity bond has a 8.9% coupon rate, paid annually. It sells today for $883.67. A 20-year maturity bond has 8.4% coupon rate, also paid annually. It sells today for $885.5. Because the yield curve is upward sloping, the analyst believes th..

Developed solar powered vehicle : Assume that it is now January 1, 2016. Juan Jones Engineering (JJE) has developed a solar powered vehicle that has a driving range of 200% more than any other solar powered vehicle on the market. As a result, JJE, is expected to experience a 17% annu..

Expansion project-requires initial fixed asset investment : Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,430,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to gener..

There is expected to be no salvage value for the equipment : Lewis Industries looking at a project that will require a $100,000 investment in fixed assets and another $15,000 in net working capital, which will be recovered at the end of the project. The project is expected to produce sales of $110,000 with ass..

Bond issues outstanding-shares of common stock outstanding : Filer Manufacturing has 8.7 million shares of common stock outstanding. The current share price is $57, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $70.8 milli..

Thereafter the firms dividends are expected to grow : Dartsch Corporation just paid a dividend of €1.45. Dartsch is expected to increase its dividend by 12 percent for the next five years, thereafter the firm’s dividends are expected to grow at a more modest rate of 4 percent indefinitely. If the requir..

What is the stocks return for the coming year : The current price of a stock is $20 and last years price was $18.87. The latest dividend is $2. Assume a constant growth rate in dividends and stock price. What is the stocks return for the coming year?

User Account

All Pages