.H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,460,000. The fixed asset falls into the three-year MACRS class (MACRS Table). The project is estimated to generate $2,270,000 in annual sales, with costs of $1,260,000. The project requires an initial investment in net working capital of $162,000, and the fixed asset will have a market value of $187,000 at the end of the project. Assume that the tax rate is 35 percent and the required return on the project is 8 percent.
a. What is the net cash flow of the project each year?
b. What is the NPV of the project?