Compact in expansion projects with the expectation of increasing the eaming of its business Consider the of Garida De. Garida Co. is considering an intent that will have the following salis, variables and fixed operating costs: Year 1 Unit Sales Sarice $22.33 Variable per unit 59.45 Fixed operating costs $32,500 Year 2 5.100 523.45 Year 3 5.000 $23.85 Year 4 5,120 $24.45 $12.00 534,875 SI0.85 $33,450 $34,950 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at -0, so it will be fully deprecated at the time of purchase. The equipment will have to salvage value at the end of the projects four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11. Demine what the project's not present value (NPV) would be under the new tax law. Determine what the projecte present value (NPV) would be under the new tax law. O $70,554 O 558,795 O $52,916 Non durine what the projects would be whening straight-line de Using the depreciation method will result in the Highest for the project No other fem wuld take on this project if Garida tuma il down. How much should Garida reduce the war this project if it diced that this project would reduce one of its divisione after-tax cash flows by $400 for each year of the four-year project? O $1,055 O $1.241 O $1365 Garida spent $2,500 on a marketing study to estimate the number of tits that it can all each year. What should Garida do to take this information Increase the amount of the initial investment by $2,500. Increase the NPV of the proje 52,500. The company does not need to do anything with the cost of the marketing study because the marketing study is a sus 4. Analysis of a replacement project At times fums will need to decide if they want to continue to use the current equipment or replace the equipment with newer equipment. The company will need to do replacemene vialysis to determine which option is the best lancial decision for the company Price is considering replacing and piece of equipment. The proped involves the following: . The new equipment will have a cost of $1,200,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at The old machine was purchased before the new tax law, so it is being depreciated on a straight line basis. It has a book value of $200,000 (at year) and four more years of depreciation of ($50,000 per year). . The new equipment will have a salvage value of at the end of the prod's life (war 6). The old machine has a current salvage value (all year of $300,000. . Replacing the old machine will require an investment in net operating working capital (NOWC) of $45.000 that will be recived at the end of the project's bre[year 6). . The new machine is more afficient, so the firm's incrementalarnings before interest and laats (EBIT) will increase by a total of $500,000 in each of the next six years [years 1-6). Hunt: This value represents the difference between the rails and operating cols (including depreciation experie) gerated using the new equipment and that wanted in the old equipment. . The project's cost of capital is 13% . The company's annual tax rate is 25% Complete the following table and compute the incremental cash flows associated with the replacement of the old cunt with the requieren Year o Year 1 Year 2 Year 3 Year 4 Years Inicial EBIT Depreciation | + Salvage - Tax salvage NOWC + Rapture of NOW Total free cash flow The nel print value (NPV) of this replacement project O $610,1 O $35,542 0813,515 Compact in expansion projects with the expectation of increasing the eaming of its business Consider the of Garida De. Garida Co. is considering an intent that will have the following salis, variables and fixed operating costs: Year 1 Unit Sales Sarice $22.33 Variable per unit 59.45 Fixed operating costs $32,500 Year 2 5.100 523.45 Year 3 5.000 $23.85 Year 4 5,120 $24.45 $12.00 534,875 SI0.85 $33,450 $34,950 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at -0, so it will be fully deprecated at the time of purchase. The equipment will have to salvage value at the end of the projects four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11. Demine what the project's not present value (NPV) would be under the new tax law. Determine what the projecte present value (NPV) would be under the new tax law. O $70,554 O 558,795 O $52,916 Non durine what the projects would be whening straight-line de Using the depreciation method will result in the Highest for the project No other fem wuld take on this project if Garida tuma il down. How much should Garida reduce the war this project if it diced that this project would reduce one of its divisione after-tax cash flows by $400 for each year of the four-year project? O $1,055 O $1.241 O $1365 Garida spent $2,500 on a marketing study to estimate the number of tits that it can all each year. What should Garida do to take this information Increase the amount of the initial investment by $2,500. Increase the NPV of the proje 52,500. The company does not need to do anything with the cost of the marketing study because the marketing study is a sus 4. Analysis of a replacement project At times fums will need to decide if they want to continue to use the current equipment or replace the equipment with newer equipment. The company will need to do replacemene vialysis to determine which option is the best lancial decision for the company Price is considering replacing and piece of equipment. The proped involves the following: . The new equipment will have a cost of $1,200,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at The old machine was purchased before the new tax law, so it is being depreciated on a straight line basis. It has a book value of $200,000 (at year) and four more years of depreciation of ($50,000 per year). . The new equipment will have a salvage value of at the end of the prod's life (war 6). The old machine has a current salvage value (all year of $300,000. . Replacing the old machine will require an investment in net operating working capital (NOWC) of $45.000 that will be recived at the end of the project's bre[year 6). . The new machine is more afficient, so the firm's incrementalarnings before interest and laats (EBIT) will increase by a total of $500,000 in each of the next six years [years 1-6). Hunt: This value represents the difference between the rails and operating cols (including depreciation experie) gerated using the new equipment and that wanted in the old equipment. . The project's cost of capital is 13% . The company's annual tax rate is 25% Complete the following table and compute the incremental cash flows associated with the replacement of the old cunt with the requieren Year o Year 1 Year 2 Year 3 Year 4 Years Inicial EBIT Depreciation | + Salvage - Tax salvage NOWC + Rapture of NOW Total free cash flow The nel print value (NPV) of this replacement project O $610,1 O $35,542 0813,515