Calculating project cash flow from assets

Assignment Help Financial Management

Reference no: EM131551187

1. Calculating Project OCF. H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $1,950,000. 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 generate $2,145,000 in annual sales, with costs of $1,205,000. If the tax rate is 35 percent, what is the OCF for this project?

2. Calculating Project NPV. In the previous problem, suppose the required return on the project is 14 percent. What is the project's NPV?

3. Calculating Project Cash Flow from Assets. In the previous problem, suppose the project requires an initial investment in net working capital of $150,000, and the fixed asset will have a market value of $175,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV?

4. NPV and Modified ACRS. In the previous problem, suppose the fixed asset actually falls into the three-year MACRS class. All the other facts are the same. What is the project's Year 1 net cash flow now? Year 2? Year 3? What is the new NPV?

Reference no: EM131551187

Questions Cloud

Compute the percentage total return-capital gains yield : Compute the percentage total return. What was the dividend yield? The capital gains yield?

Expected growth rate of the dividends : Explain why the required return on a stock must be greater than the dividend yield and greater than the expected growth rate of the dividends

Characteristic of a zero-coupon bond : Which of the following is not a characteristic of a zero-coupon bond?

Cost-cutting proposals : Cost-Cutting Proposals. CSM Machine Shop is considering a four-year project to improve its production efficiency.

Calculating project cash flow from assets : Calculating Project OCF. Calculating Project Cash Flow from Assets. NPV and Modified ACRS.

Hypothetical information relating to a new proposal : Discussion presents hypothetical information relating to a new proposal designed to enhance environmental and social performance across Jayco's supply chain.

Differences in the risk and profit and loss potential : explain and illustrate the differences in the risk and profit/loss potential among them.

What is the current intrinsic value of vandell stock : What are Vandell's cost of equity and weighted average cost of capital? What is the current intrinsic value of Vandell's stock?

Product and economies of scale should influence their focus : Explain how the price elasticity of demand for its product and economies of scale should influence their focus.

User Account

All Pages