2. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Fox Co.: Fox Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 3 Year 2 5,200 Year 4 5,820 5,500 5,700 $42.57 $43.55 $44.76 $46.79 Unit sales Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate $23.45 $23.87 $22.83 $66,750 $22.97 $68,950 $69,690 $68,900 7% 33% 45% 15% This project will require an investment of $10,000 in new equipment. The equipment will have no salvage value at the end of the project's 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 project's net present value (NPV) would be when using accelerated depreciation. Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to the nearest whole number.) dy Tools $82,622 $99,146 Tips $74,360 $95,015 Tips Now determine what the project's NPV would be when using straight-line depreciation Using the depreciation method will result in the highest NPU for the $82,451 103,064 No other firm would take on this project if Fox turns it down. How much should Fox redu of this project if it discovered that this project would reduce one of its division's net after-tax cash flows by $400 for each year of the 107.186 oject? 94,819 $1,241 $1,055 $931 $1,365 Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to the nearest whole number.) Is $82,622 O $99,146 $74,360 $95,015 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 fi straight-line 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 redu accelerated vision's net after-tax cash flows by $400 for each year of the four-year project? $1,241 $1,055 $931 $1,365