3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Black Sheep Broadcasting: Black Sheep Broadcasting is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 3 Year 1 5,500 Year 2 5.200 Year 4 5,820 5,700 Unit sales (units) Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate 542.57 $22.83 $66.750 543.55 $22.97 $44.76 $23.45 $69,690 546.79 $23.87 $68,900 $68,950 33% 45% 15% 7% This project will require an investment of $15,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Black Sheep Broadcasting pays a constant tax rate of 40%, and it has a required rate of return of 11%. (Hint: Round each element in your computation- When using accelerated depreciation, the project's net present value (NPV) is including the project's net present value-to the nearest whole dollar.) When using straight-line depreciation, the project's NPV is project's net present value-to the nearest whole dollar) (Hint: Again, round each element in your computation including the Using the depreciation method will result in the greater NPV for the project. No other firm would take on this project if Black Sheep Broadcasting turns it down. How much should Black Sheep Broadcasting 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 S400 for each year of the four-year project? $1,365 O $1,241 $1,055 $931 Black Sheep Broadcasting spent $1,750.00 on a marketing study to estimate the number of units that it can sell each year. What should Black Sheep Broadcasting do to take this information into account? Increase the NPV of the project 51,750.00. The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost. O Increase the amount of the initial investment by $1,750.00. Grade It Now Save & Continue