Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.55 million. The fixed asset falls into the three-year MACRS class the project is projected to generate $2,300,000 in annual sales with costs of $1,290,000. The project needs an initial investment in networking capital of $165,000 as well as the fixed asset will have a market value of $190,000 at the end of the project. Presume that the tax rate is 35 percent as well as the required return on the project is 7 percent.
Explain what is the net cash flow of the project for years 0, 1, 2, and 3?
Explain what is the NPV of the project?