a)

b)

c)

The new 2018 tax laws changed how taxes are affected by depreciation by allowing 100% depreciation the first year the equipment is used. by considering depreciation as income which must be taxed. saying straight line depreciation must be used to calculate taxes. O no longer allowing depreciation to be deducted as an expense to calculate taxes. O by delaying depreciation until the last year of equipment use. When a company has a high proportion of fixed costs (as compared to variable costs) When revenues change, the percentage the company's Earnings Before Interest and Taxes (EBIT) will change is lower than if they had high variable costs. EBIT will change a relatively large amount when revenues change. the company can more easily borrow without affecting risk much. O This will protect the company from losses especially when there is an economic downturn. o there is relatively low operating leverage. Crunchy Corp has several projects in their line of nuts and candy. The risk of the nut products are low: Crunchy is considering adding expensive chocolate nut products which have a higher risk due being luxury items. Crunchy has a weighted average cost of capital of 7%. The chocolate products should be evaluated using a required rate less than 7%. O A high risk project such as the luxury chocolates should never be considered by a company producing low risk products. O When analyzing the NPV of the luxury chocolate products the required rate should be greater than 7%. All products' required rates should be 7% as that is the cost of raising capital. The luxury chocolate would only use a rate higher than the cost of capital if the cash flows are higher than in other products