McFann 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 $$42\mathrm{.}57/$ $$43\mathrm{.}55/$$$44\mathrm{.}76/$$$46\mathrm{.}79$

Variable cost per unit $$22\mathrm{.}83/$$$22\mathrm{.}97/$$$23\mathrm{.}45/$$$23\mathrm{.}87$

Fixed operating costs $$66,750/$$$68,950/$$$69,690/$ $$68,900$

This project will require an investment of $$15,000$ in new equipment. Under the new tax law, the equipment is eligible for $100\%$ bonus deprecation at t $=0,$ so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project$$s four$-$year life. McFann 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.

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

$$100,435\mathrm{.}69$

$$80,348\mathrm{.}55$

$$90,392\mathrm{.}12$

$$115501\mathrm{.}04$

Now determine what the project$$s NPV would be when using straight$-$line depreciation. $\_\_\_$

$$124,492\mathrm{.}79$

$$114,533\mathrm{.}36$

$$94,614\mathrm{.}52$

$$99,594\mathrm{.}23$

Using the $\_\_\_$ depreciation method will result in the highest NPV for the project.

$($bonus or straight line$)$

No other firm would take on this project if McFann turns it down. How much should McFann reduce the NPV of this project if it discovered that this project would reduce one of its division$$s net after$-$tax cash flows by $$400$ for each year of the four$-$year project? $\_\_\_$

$$930\mathrm{.}74$

$$1,054\mathrm{.}83$

$$1,240\mathrm{.}98$

$$744\mathrm{.}59$

McFann spent $$2,500$ on a marketing study to estimate the number of units that it can sell each year. What should McFann do to take this information into account? $\_\_\_$

Increase the NPV of the project $$2,500.$

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 $$2,500.$