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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 3,000 3,250 3,300 3,400 $17.25 $17.33 $17.45 $18.24 $8.88 $8.92 $9.03 $9.06 $12,500 $13,000 $13,220 $13,250 Unit sales Sales price Variable cost per unit Fixed operating costs is project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Fox ys a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) uld be under the new tax law. sich of the following most closely approximates what the project's net present value (NPV) would be under the new tax law?(Hint: Round your final swer to two decimal places and choose the value that most closely matches your answer.) $20,571.03 $27,428.04 $26,285.20 $22,856.70 sich of the of the following most closely approximates what the project's NPV would be when using straight-line depreciation? (Hint: Round your al answer to two decimal places and choose the value that most closely matches your answer.) $25,317.54 $27,519.06 O $22,015.25 $20,914.49

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 3,000 3,250 3,300 3,400 $17.25 $17.33 $17.45 $18.24 $8.88 $8.92 $9.03 $9.06 $12,500 $13,000 $13,220 $13,250 Unit sales Sales price Variable cost per unit Fixed operating costs is project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Fox ys a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) uld be under the new tax law. sich of the following most closely approximates what the project's net present value (NPV) would be under the new tax law?(Hint: Round your final swer to two decimal places and choose the value that most closely matches your answer.) $20,571.03 $27,428.04 $26,285.20 $22,856.70 sich of the of the following most closely approximates what the project's NPV would be when using straight-line depreciation? (Hint: Round your al answer to two decimal places and choose the value that most closely matches your answer.) $25,317.54 $27,519.06 O $22,015.25 $20,914.49

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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Fox 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 This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Fox pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. O $20,571.03 O $27,428.04 O $26,285.20 O $22,856.70 Which of the following most closely approximates what the project's net present value (NPV) would be under the new tax law?(Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Year 1 Year 2 Year 3 3,000 3,250 3,300 $17.25 $17.33 $17.45 $8.88 $8.92 $9.03 $12,500 $13,000 $13,220 O $25,317.54 O $27,519.06 O $22,015.25 O $20,914.49 Year 4 3,400 $18.24 $9.06 $13,250 Which of the of the following most closely approximates what the project's NPV would be when using straight-line depreciation? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Using the O $1,706.34 O $1,551.22 O $1,163.42 O $1,318.54 depreciation method will result in the highest NPV for the project. No other firm would take on this project if Fox turns it down. Which of the following most closely approximates how much Fox should reduce the NPV of this project, assuming it is discovered that this project would reduce one of its division's net after-tax cash flows by $500 for each year of the four- year project? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Fox spent $2,250 on a marketing study to estimate the number of units that it can sell each year. What should Fox do to take this information into account? O Increase the NPV of the project $2,250. The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost. Increase the amount of the initial investment by $2,250.
Transcribed Image Text:Fox 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 This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Fox pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. O $20,571.03 O $27,428.04 O $26,285.20 O $22,856.70 Which of the following most closely approximates what the project's net present value (NPV) would be under the new tax law?(Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Year 1 Year 2 Year 3 3,000 3,250 3,300 $17.25 $17.33 $17.45 $8.88 $8.92 $9.03 $12,500 $13,000 $13,220 O $25,317.54 O $27,519.06 O $22,015.25 O $20,914.49 Year 4 3,400 $18.24 $9.06 $13,250 Which of the of the following most closely approximates what the project's NPV would be when using straight-line depreciation? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Using the O $1,706.34 O $1,551.22 O $1,163.42 O $1,318.54 depreciation method will result in the highest NPV for the project. No other firm would take on this project if Fox turns it down. Which of the following most closely approximates how much Fox should reduce the NPV of this project, assuming it is discovered that this project would reduce one of its division's net after-tax cash flows by $500 for each year of the four- year project? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Fox spent $2,250 on a marketing study to estimate the number of units that it can sell each year. What should Fox do to take this information into account? O Increase the NPV of the project $2,250. The company does not need to do anything with the cost of the marketing study because the marketing study is a sunk cost. Increase the amount of the initial investment by $2,250.
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