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6. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of
6. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Yeatman Co.: Yeatman 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 5,120 $22.33 $23.45 $23.85 $24.45 $9.45 $10.85 $11.95 $12.00 Fixed operating costs except depreciation $32,500 $33,450 $34,950$34,875 70/o 5,100 5,000 Unit sales Sales price Variable cost per unit 4,800 Accelerated depreciation rate 33% 45% 15% This project will require an investment of $25,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Yeatman 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 O $36,218 O $28,974 O $41,651 O $32,596
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