Total Risk

Fox 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 4,250 $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% 4,000 4,200 Unit sales Sales price Variable cost per unit 3,500 Accelerated depreciation rate 33% 45% 15% This project will require an investment of $20,000 in ne Determine what the project's net present value (NPV) equipment. The equipment wil have no salvage value at the end of the project's four-year life. Fox 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 would be when using accelerated depreciation O $45,696 O $35,762 O $39,736 O $47,683 Now determine what the project's NPV would be when using straight-line depreciation. | $45,303 $39,394 $45,303 $37,424 depreciation method will result in the highest NPV for the pr $51,212 Using the