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help me! Companies invest in expansion projects with the expectation of increasing the eamings of its business. Consider the case of Garida Co.: Garida Co.
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Companies invest in expansion projects with the expectation of increasing the eamings of its business. Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, ariable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 3,500,000 ,200 ,250 $38.50 $39.88 $40.15 $41.55 $22.34$22.85 $23.67 $23.87 Fixed operating costs except depreciation $37,000 $37,500 $38,120 $39,560 7% Unit sales Sales price Variable cost per unit Accelerated depreciation rate 45% 33% 15% This project will require an investment of $15,000 inne 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 (NP) would be when using accelerated depreciation. Determine what the project's net present value (NPV) would be when using accelerated depreciation. O $38,789 O $34,479 O $43,099 O $51,719 Now determine what the project's NPV would be when using straight-line depreciation. Using the depreciation methad 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 $500 for each year of the four-year project? $1,706 $1,551 O $931 O $1,318Step by Step Solution
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