Answer the next four questions about the following project. Geodyne Corp. is considering an investment in a new type of desalination equipment. The equipment should allow them to streamline their raw material processing by moving some of the production off-shore. If implemented, it is expected to provide an annual (pre-tax) cost savings of $201,000 in each of the next three years. The equipment will cost $510,000, and is classified as 3-year MACRS property. Geodyne expects to salvage the equipment for $96,000 at the end of the three years. Geodyne has a 40% marginal tax rate and a WACC of 9%. Question 5 1 pts What is the NPV of the project? 11,235 -3412 14,980 13,435 8347 Question 6 1 pts Suppose the firm's sharp, new financial analyst from UAH reminds the project manager that the new equipment will have to be towed off-shore on a barge that the firm currently leases out to a commercial mining company at $5600 per year. How will this affect the NPV? New NPV = 1290 New NPV = 3214 New NPV = 4930 This is not a relevant cash flow, therefore NPV does not change. New NPV = -76 Going back to the original project description and estimates, suppose Geodyne can only salvage the equipment for $86,000. How does this affect the NPV? New NPV = -2156 New NPV = 8802 New NPV = -987 New NPV = 247 Question 8 1 pts Going back to the original project description and estimates, suppose the VP for Operations suggests that this project is riskier than others believe. Hence, the required return should be greater than the firm's overall WACC. She suggests the required return should be 13.5 percent. How does this affect the NPV? New NPV = -6,345 New NPV = 12,672 New NPV = 6,592 New NPV = -26,982