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Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: This project will require an investment of
Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: This project will require an investment of $20,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Yeatman 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. (Note: Round your answer to the nearest whole dollar.) $41,554$55,405$46,171$53,097 Now determine what the project's NPV would be when using straight-line depreciation. (Note: Round your answer to the nearest whole dollar.) The depreciation method will result in the highest NPV for the project. No other firm would take on this project if Yeatman turns it down. How much should Yeatman 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? (Note: Round your answer to the
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