Question
After examining the NPV analysis for a potential project that would increase the firms output by 5 percent, an analysts manager tells the analyst to
After examining the NPV analysis for a potential project that would increase the firms output by 5 percent, an analysts manager tells the analyst to increase the initial fixed capital outlay in the analysis by $480,000. The initial fixed capital outlay would be fully depreciated on a straight-line basis over a 12-year life, regardless of whether it is increased. If the firms average tax rate is 28 percent, its marginal tax rate is 35 percent, and the required rate of return is 10 percent, what is the effect of the adjustment on the project NPV?
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