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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
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 Unit sales. 5,500 5,200 5,700 5,820 Sales price $42.57 $43.55 $44.76 $46.79 Variable cost per unit $22.83 $22.97 $23.45 $23.87 Fixed operating costs except depreciation $66,750 $68,950 $69,690 $68,900 Accelerated depreciation rate 33% 45% 15% 7% This project will require an investment of $25,000 in new Determine what the project's net present value (NPV) equipment. The equipment will have no salvage value a would be when using accelerated depreciation. the end of the project's four-year life. Garida pays a $58,026 O constant tax rate of 40%, and it has a weighted average $87,038 O cost of capital (WACC) of 11%. Determine what the $72,532 project's net present value (NPV) would be when using O 12 accelerated depreciation. Now determine what the project's NPV would be when using straight-line depreciation. $72,105 $68,500 $90,131 Using the depreciation method will result in the highest NPV for the pr $93,737
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