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Companies invest in expansion projects with the expectation of increasing the earnings of its business Consider the case of Garida Co.: Garida Co. is considering
Companies invest in expansion projects with the expectation of increasing the earnings of its business Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 3,400 $17.25 $17.33 $17.45 $18.24 $8.88 $8.92 $9.03 $9.06 Fixed operating costs except depreciation $12,500 $13,000 $13,220 $13,250 7% 3,250 3,300 Unit sales Sales price Variable cost per unit 3,000 Accelerated depreciation rate 33% 45% 15% This project will require an investment of $25,000 in ne Determine what the project's net present value (NPV) equipment. The equipment wil have no salvage value at the end of the project's four-year life. Garida pays a constant tax rate of 40%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be when using accelerated depreciation would be when using accelerated depreciation O $9,422 O $10,469 O $12,039 $8,375
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