Go to the “live” Excel spreadsheet versions of Tables 6.1, 6.5, and 6.6 at www.mhhe.com/bma and answer the following questions.
a. How does the guano project’s NPV change if IM&C is forcd to use the seven-year MACRS tax depreciation schedule?
b. New engineering estimates raise the possibility that capital investment will be more than $10 million, perhaps as much as $15 million. On the other hand, you believe that the 20% cost of capital is unrealistically high and that the true cost of capital is about 11%. Is the project still attractive under these alternative assumptions?
c. Continue with the assumed $15 million capital investment and the 11% cost of capital. What if sales, cost of goods sold, and net working capital are each 10% higher in every year? Recalculate NPV. ( Note: Enter the revised sales, cost, and working-capital forecasts in the spreadsheet for Table 6.1 .)
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