National Manufacturing Company is considering buying some new equipment that would allow for increased sales of its product. The incremental impact of the proposed $400,000 investment is shown below using straight-line depreciation and an expected useful life of four years for the equipment. The company has a minimum desired rate of return of 14%.

Revenues $500,000

Nondepreciating expenses $300,000

Depreciation $100,000

Total expenses $400,000

Taxable income $100,000

Income tax (40%) $40,000

Net income $60,000

Question 9: The annual cash inflows expected from the project are _____

Question 9 options: $100,000 $40,000 $120,000 $140,000 $160,000

Question 10: The present value of the tax savings from straight-line depreciation is _____.

Question 10 options: $100,000 $116,548 $81,584 $174,822

Question 11: The NPV of the investment using straight-line depreciation is _____.

Question 11 options: ($280,000) $66,192 $349,644 $116,548

Question 12: If the investment was allowed to depreciate over a three-year recovery period and the double-declining-balance method of depreciation was used, the present value of the tax savings from depreciation would be _____.

Question 12 options: $53,274 $66,464 $132,928 $280,000

Question 13: Using the DDB depreciation and a three-year recovery period to compute the tax savings from depreciation results in _____.

Question 13 options: a higher NPV, and is still positive to make the investment desirable a lower NPV that would suggest that the investment should be made an even lower NPV of the investment than resulted using the straight-line method the same NPV as was computed when using straight-line depreciation