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 Lumbering Ox Truckmakers: Lumbering Ox Truckmakers is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 3 Year 4 4.400 Year 1 4,200 $29.82 $12.15 $41,000 Unit sales (units) Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate Year 2 4.100 $30.00 $13.45 $41,670 $33.19 4,300 $30.31 $14.02 $41,890 $14.55 $40,100 790 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. Lumbering Ox Truckmakers pays a constant tax rate of 40%, and it has a required rate of return of 119 When using accelerated depreciation, the project's net present value (NPV) is including the project's net present value-to the nearest whole dollar.) (Hint: Round each element in your computation- 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 Lumbering Ox Truckmakers turns it down. How much should Lumbering ox Truckmakers 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 $600 for each year of the four-year project? $1,582 $2,047 $1,361 $1,396 The project will require an initial investment of $25,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for $4,000, after taxes, if the project is rejected. What should Lumbering Ox Truckmakers do to take this information into account? Increase the NPV of the project by $4,000 Increase the amount of the initial investment by $4,000 The company does not need to do anything with the value of the truck becaus