Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Y

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Garida Co Is Considering An Investment That Will Have The Following Sales Variable Costs And Fixed Operating Costs Y 1 (262.38 KiB) Viewed 31 times

Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 4 Year 2 3,250 Year 3 3,300 Unit sales 3,000 3,400 Sales price $17.25 $17.33 $17.45 $18.24 $8.88 $8.92 $9.03 $9.06 Variable cost per unit Fixed operating costs $12,500 $13,000 $13,220 $13,250 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. Determine what the project's net present value (NPV) would be under the new tax law. O $21,286 O $23,947 O $31,930 O $26,608 Now determine what the project's NPV would be when using straight-line depreciation. Using the depreciation method will result in the highest NPV for the project. No other firm would take on this project if Garida turns it down. How much should Garida reduce the NPV of this project if it discovered that this project would reduce one of its division's net after-tax cash flows by $300 for each year of the four-year project? O $698 $1.024