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 Fox Co.: Fox Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: This project will require an investment of $25,000 in new equipment. Under the new tax law, the equipment is eligible fo 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 pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the proj would be under the new tax law. Determine what the project's net present value (NPV) would be under the new tax law. $106,876$92,936$83,642$111,523 Now determine what the project's NPV would be when using straight-line depreciation. Using the straight-line depreciation method will result in the highest NPV for the project. No other firm would take on this project if Fox turns it down. How much should Fox reduce the NPV of this project if it disc would reduce one of its division's net after-tax cash flows by $700 for each year of the four-year project? $1,629 $2,389 $2,172 $1,846 The project will require an initial investment of $25,000, but the project will also be using a company-owned truck that is This truck could be sold for $12,000, after taxes, if the project is rejected. What should Fox do to take this information into Increase the NPV of the project by $12,000. The company does not need to do anything with the value of the truck because the truck is a sunk cost. Increase the amount of the initial investment by $12,000