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Fox Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 4,400 $29.82 $30.00 $30.31 $33.19 $12.15 $13.45 $14.02 14.55 Fixed operating costs except depreciation $41,000 $41,670 $41,890 $40,100 7% 4,200 4,100 4,300 Unit sales Sales price Variable cost per unit Accelerated depreciation rate 33% 45% 15% This project will require an investment of $25,000 in new equipment. The equipment wil have no salvage value at the end of the projects four-year life. Fox pays a constant tax rate of 40%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the projects net present value (NPV) would be when using accelerated depreciation Determine what the projects net present value (NPV) would be when using accelerated depreciation $49,229 O $38,527 O $42,808 $51,370 Now determine what the projects NPV would be when using straight-line depreciation Using the depreciation method will result in the highest NPV for the projectNo other firm would take on this project if Fox turns it down. How much should Fox reduce the NPV of this project if it discovered that this project would reduce one of its divisions net after-tax cash flows by $300 for each year of the four-year project? O $791 O $559 O $931 O $1,024 Fox spent $1,500 on a marketing study to estimate the number of units that it can sell each year. What should Fox do to take this information into account? The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost Increase the amount of the initial investment by $1,500. Increase the NPV of the project $1,500

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Home nert Page Layout Formulas Data Review View dd-Ins ー E ゴWrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting, as Table w styles. ▼ ㆆ ▼ 2 ClearFe Select STRAIGHT LINE COST OF MACHINE 125244 130333 146036 VARIABLE COST FIXED COST DEPRECIATION 55145 41670 35666 8762.8 14266.4 13144.2 21399.6 TAX @40% 10785.6 16178.4 11961 DEPRECIATION 22428.4 19394.227649.6 TERMINAL CFAT PV FACTOR @ 11% 22428.4 19394.227649.6 0.6587 18214 42381 NPV (4 トト MIRR NPV İRR REPLACEMENT S HPR GMAM EAC MACRS LEASE- , RATIOCASHBUDGET / wacc . BOND EPS EBIT REPLACEMENT (STats | NPV . BETA LEVERED 9う - - 福 130% 674 5 2 0126 52 1 078202 123 5 6 3282 304 4 31 16171 1 50054101 47537651 9922 7168 1 3516 884 251 2 2 21 3 254 202 RTC AEF 567 89 6 7 - 23 8 1234▼ 7

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