G Gwhat are ocean wave me Tap - Cengage Learning CENGAGE MINDTAP ch 12: Assignment - Cash Flow Estimation and Risk Analysis 3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of McFann Co.. McFann Co. is considering an investment that will have the following sales, variable costs, and fixed operat Year 3 Year 4 3,300 Year 1 Unit sales 3,000 Sales price $17.25 Variable cost per unit $8.88 Fixed operating costs $12,500 Year 2 3,250 $17.33 $8.92 3,400 $18.24 $17.45 $9.03 $9.06 $13,250 $13,000 $13,220 This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is elic t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end Mefann pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine value (NPV) would be under the new tax law. Determine what the project's net present value (NPV) would be under the new tax taw. $22,858 $27.430 $26,287 $13,285 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 otherm would take on this project can turns down. How much should can reduce the NPV of this proje project would reduce one of its division's netwer-tax cash flows by S400 for each year of the four-year project $1,055 $1,241