Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed opereting costs Year 1 Year 2 Year 3 Year Unit sales Sales price Variable cost per unit 4,800 5,100 5,000 5,120 $22.33 $23.45 $23.85 $24,45 9.45 $10.85 $11.95 $12.00 Fixed operating costs except depreciation $32,500 33,450 $34,950 $34,875 33% 45% 15% 7% Accelerated depreciation rate This project willrequire an investment of $15,000 in new Determine what the project's net present value (NPV) equipment. The equipment will have no salvage value at would be when using accelereted depreciation the end of the project's four-year life. Yeatman paysa 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. O $49,386 $42,944 O $34,355 O $51,533 Now determine what the project's NPV would be when using straight-line depreclation Using 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 $300 for each year of the four-year project? O $931 O $559 O $791 O $1,024 each year. What should Yeatman do to take this Ye information into account? atman spent $2,500 on a marketing study to estimate the number of unts that it can sell O The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost O Increase the amount of the initial investment by $2,500. O Increase the NPV of the project $2,500. Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed opereting costs Year 1 Year 2 Year 3 Year Unit sales Sales price Variable cost per unit 4,800 5,100 5,000 5,120 $22.33 $23.45 $23.85 $24,45 9.45 $10.85 $11.95 $12.00 Fixed operating costs except depreciation $32,500 33,450 $34,950 $34,875 33% 45% 15% 7% Accelerated depreciation rate This project willrequire an investment of $15,000 in new Determine what the project's net present value (NPV) equipment. The equipment will have no salvage value at would be when using accelereted depreciation the end of the project's four-year life. Yeatman paysa 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. O $49,386 $42,944 O $34,355 O $51,533 Now determine what the project's NPV would be when using straight-line depreclation Using 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 $300 for each year of the four-year project? O $931 O $559 O $791 O $1,024 each year. What should Yeatman do to take this Ye information into account? atman spent $2,500 on a marketing study to estimate the number of unts that it can sell O The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost O Increase the amount of the initial investment by $2,500. O Increase the NPV of the project $2,500
