$6.$ Analysis of an expansion projectCompanies invest in expansion projects with the expectation of increasing the earnings of its business.Consider the case of Blue Llama Mining:Blue Llama Mining is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year $1$Year $2$Year $3$Year $4$Unit sales $($units$)3,0003,2503,3003,400$Sales price$$17\mathrm{.}25$$$17\mathrm{.}33$$$17\mathrm{.}45$$$18\mathrm{.}24$Variable cost per unit$$8\mathrm{.}88$$$8\mathrm{.}92$$$9\mathrm{.}03$$$9\mathrm{.}06$Fixed operating costs except depreciation$$12,500$$$13,000$$$13,220$$$13,250$Accelerated depreciation rate$33\%45\%15\%7\%$This project will require an investment of $$25,000$ in new equipment. The equipment will have no salvage value at the end of the projects four$-$year life. Blue Llama Mining pays a constant tax rate of $40\%,$ and it has a required rate of return of $11\%.$When using accelerated depreciation, the projects net present value $($NPV$)$ is $.($Hint: Round each element in your computationincluding the projects net present valueto the nearest whole dollar.$)$When using straight$-$line depreciation, the projects NPV is $.($Hint: Again, round each element in your computationincluding the projects net present valueto the nearest whole dollar.$)$Using the depreciation method will result in the greater NPV for the project.No other firm would take on this project if Blue Llama Mining turns it down. How much should Blue Llama Mining reduce the NPV of this project if it discovered that this project would reduce one of its divisions net after$-$tax cash flows by $$500$ for each year of the four$-$year project?$$1,551$$$1,163$$$1,706$$$931$The project will require an initial investment of $$25,000,$ but the project will also be using a company$-$owned truck that is not currently being used. This truck could be sold for $$18,000,$ after taxes, if the project is rejected. What should Blue Llama Mining do to take this information into account?Increase the NPV of the project by $$18,000.$Increase the amount of the initial investment by $$18,000.$The company does not need to do anything with the value of the truck because the truck is a sunk cost.