Concider the cace of Garida Co$.$:

Activity Frame

Garida Co$.$ is considering an investment that will have the following sales, variable costs,

and fixed operating costs:

This project will require an investment of $$10,000$ in new equipment. The equipment will 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.

Determine what the project's net present value $($NPV$)$ would be when using accelerated

depreciation. $($Note: Round your intermediate calculations to the nearest whole number.$)$

$$37,046$

$$53,254$

$$55,570$

$$46,308$

Now determine what the project's NPV would be when using straight$-$line depreciation.

Using the

depreciation method will result in the highest NPV for the project.

No other firm would take on this project if Garida turns it down. How much should Garida reduce

the NPV of this project if it discovered that this project would reduce one of its division's net after$-$

tax cash flows by $$400$ for each year of the four$-$year project?

$$1,241$

$$1,055$

$$1,365$

$$745$