Cochrane, Inc., is considering a new three-year expansion project that requires

Question

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.46 million. 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 $2,270,000 in annual sales, with costs of $1,260,000.

If the tax rate is 35 percent, what is the OCF for this project? (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.46 million. 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 $2,270,000 in annual sales, with costs of $1,260,000.

Explanation / Answer

Initial Investment (A) 2460000 Depriciation=A/3(B) 820000 Sales

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