Year 1 Year 2 Year 3 Year 4 Unit sales Sales price 4,200 4,100 4,300 4,400 $29.82 $30.00 $30.31 Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate $33.19 $12.15 $13.45 $14.02 $14.55 $41,000 $41,670 $41,890 $40,100 33% 45% 15% 7% 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. 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. Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to the nearest whole number.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Year 1
Year 2
Year 3
Year 4
Unit sales
4,200
4,100
4,300
4,400
Sales price
$29.82
$30.00
$30.31
$33.19
Variable cost per unit
$12.15 $13.45 $14.02
$14.55
Fixed operating costs except depreciation
Accelerated depreciation rate
$41,000
33%
$41,670
45%
$41,890
15%
$40,100
7%
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. 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.
Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate
calculations to the nearest whole number.)
Transcribed Image Text:Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs except depreciation Accelerated depreciation rate $41,000 33% $41,670 45% $41,890 15% $40,100 7% 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. 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. Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to the nearest whole number.)
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