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

Activity Frame costs:

This project will require an investment of $$25,000$ in new equipment. Under the new tax law, the

equipment is eligible for $100\%$ bonus deprecation at $t=0,$ so it will be fully depreciated at the

time of purchase. The equipment will have no salvage value at the end of the project's four$-$year

life. Fox pays a constant tax rate of $25\%,$ and it has a weighted average cost of capital $($WACC$)$ of

$11\%.$ Determine what the project's net present value $($NPV$)$ would be under the new tax law.

Which of the following most closely approximates what the project's net present value $($NPV$)$ would

be under the new tax law?$($Hint: Round your final answer to two decimal places and choose the

value that most closely matches your answer.$)$

$$54,896\mathrm{.}64$

$$57,283\mathrm{.}45$

$$42,962\mathrm{.}59$

$$47,736\mathrm{.}21$

Which of the of the following most closely approximates what the project's NPV would be when

using straight$-$line depreciation? $($Hint: Round your final answer to two decimal places and choose

the value that most closely matches your answer.$)$

$$53,283\mathrm{.}85$

$$57,917\mathrm{.}23$

$$46,333\mathrm{.}78$

$$44,017\mathrm{.}09$

Using the

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

No other firm would take on this project if Fox turns it down. Which of the following most closely

approximates how much Fox should reduce the NPV of this project, assuming it is discovered that

this project would reduce one of its division's net after$-$tax cash flows by $$500$ for each year of the

four$-$year project? $($Hint: Round your final answer to two decimal places and choose the value that

most closely matches your answer.$)$

$$1,318\mathrm{.}54$

$$1,706\mathrm{.}34$

$$1,551\mathrm{.}22$

$$1,163\mathrm{.}42$ The project will require an initial investment of $$25,000,$ but the project will also be using a company$-$owned truck that is not currently being used. This truck could be sold for $$9,000,$ after taxes, if the project is rejected. What should Fox do to take this information into account?

Increase the amount of the initial investment by $$9,000.$

The company does not need to do anything with the value of the truck because the truck is a sunk cost.

Increase the NPV of the project by $$9,000.$