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Please help me with all of these. #1 What would be the NPV using accelerated depriciation? How is this calculated? #2 What would the NPV
Please help me with all of these.
#1 What would be the NPV using accelerated depriciation? How is this calculated?
#2 What would the NPV be using straight line method? How is this calculated?
#3 Is it accelerated or straighline depriciation?
#4 How much should the NPV be reduced?
McFann Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Unit sales Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate Year 1 5,500 $42.57 $22.83 $66,750 33% Year 2 5,200 $43.55 $22.97 $68,950 45% Year 3Year 4 5,700 5,820 $44.76 $46.79 $23.45 $23.87 $69,690 $68,900 7% 15% This project will require an investment of $25,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. McFann 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 $65,279 O $87,038 O $72,532 $83,412 Now determine what the project's NPV would be when using straight-line depreciation $72,105 $93,737 $90,131 $68,500 Using the depreciation method will result in the highest NPV for the p 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 700 for each year of the four-year project? O $1,629 O $1,846 $2,172 $2,389Step by Step Solution
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