2. Los Pollos Hermanos, Inc., is considering a new three-year expansion project

Question

2. Los Pollos Hermanos, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset (primarily, laundry machinery) 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 $2,130,000 in annual sales, with costs of $825,000. The tax rate is 34 percent and the required return on the project is 11 percent. What is the project

2. Los Pollos Hermanos, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset (primarily, laundry machinery) 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 $2,130,000 in annual sales, with costs of $825,000. The tax rate is 34 percent and the required return on the project is 11 percent. What is the project

Explanation / Answer

2.

0 1 2 3 Initial cost -2850000 Sales 2130000 2130000 2130000 Costs -825000 -825000 -825000 Depreciation -950000 -950000 -950000 Net income 234300 234300 234300 Opertaing cash flow -2850000 1184300 1184300 1184300 NPV $44,091.34

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.