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Please explain HOW to get the answer! Thank you! Garida Co. is considering an investment that will have the following sales, variable costs, and fixed
Please explain HOW to get the answer! Thank you!
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 Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate 3,300 $17.45 3,000 $17.25 $8.88 $12,500 33% 3,250 $17.33 $8.92 3,400 $18.24 $9.06 $13,250 $9.03 $13,000 $13,220 45% 15% 7% This project will require an investment of $15,000 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 a 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. (Note: Round your intermediate calculations to the nearest whole number.) $13,756 $15,476 19,480 $17,195 16,092 $20,634 22,021 Now determine what the project's NPV would be when using straight-line depreciation. $16,939 straight-line Using the depreciation method will result in the highest NPV for the project. accelerated 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 $1,303 $1,629 $2,389Step by Step Solution
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