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 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. $53, 432 $41, 817 $55, 756 $46, 463 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 $700 for each year of the four year project? $2, 172 $1, 846 $1, 303 $2, 389 Garida spent $1, 500 on a marketing study to estimate the number of units that it can sell each year. What should Garida do to take this information into account? Increase the NPV of the project $1, 500. The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost. Increase the amount of the initial investment by $1, 500. Shan Co. is considering a four-year project that will require an initial investment of $9,000. The base-case cash flows for this project are projected to be $15,000 per year. The best-case cash flows are projected to be $22,000 per year, and the worst-case cash flows are projected to be -$1, 500 per year. The company's analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability of the project generating the best-case cash flows and a 25% probability of the project generating the worst-case cash flows. What would be the expected net present value (NPV) of this project if the project's cost of capital is 13%? $31, 408 $25, 698 $24, 270 $28, 553 Shan now wants to take into account its ability to abandon the project at the end of year 2 if the project ends up generating the worst-case scenario cash flows. If it decides to abandon the project at the end of year 2, the company will receive a one-time net cash inflow of $4, 500 (at the end of year 2). The $4, 500 the company receives at the end of year 2 is the difference between the cash the company receives from selling off the project's assets and the company's -$1, 500 cash outflow from operations. Additionally, if it abandons the project, the company will have no cash flows in years 3 and 4 of the project. Using the information in the preceding problem, find the expected NPV of this project when taking the abandonment option into account. $31, 728 $30, 217 $33, 239 $39, 282 What is the value of the option to abandon the project