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Celestial Crane Cosmetics is considering an investment that will have the following sales, variable costs, and fixed operating costs: This project will require an investment
Celestial Crane Cosmetics is considering an investment that will have the following sales, variable costs, and fixed operating costs:
This project will require an investment of $ in new equipment. The equipment will have no salvage value at the end the projects
life. Celestial Crane Cosmetics pays a constant tax rate of and it has a required rate of return of
When using accelerated depreciation, the project's net present value NPV is
When using straightline depreciation, the project's NPV is
Using the
depreciation method will result in the greater NPV for the project.
No other firm would take on this project if Celestial Crane Cosmetics turns it down. How much should Celestial Crane Cosmetics reduce the NPV of this
project if it discovered that this project would reduce one of its division's net aftertax cash flows by $ for each year of the fouryear project?
$
$
$
$
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