Hungry Whale Electronics is considering an investment that will have the following sales, variable costs, and fixed operating costs: Sales (units) Sales price Variable cost per unit Fixed costs, excluding depreciation Accelerated depreciation rate Year 1 Year 2 4,200 4,100 $29.82 $30.00 $12.15 $13.45 $41,000 $41,670 33% 45% When using acc lerated depreciation, project's net present This project will require an investment of $10,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Hungry Whale Electronics pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using straight-line depreciation, the project's NPV is Using the Year 3 4,300 $30.31 $14.02 $41,890 15% Year 4 4,400 $33.19 $14.55 $40,100 7% (NPV) is depreciation method will result in the greater NPV for the project.
Hungry Whale Electronics is considering an investment that will have the following sales, variable costs, and fixed operating costs: Sales (units) Sales price Variable cost per unit Fixed costs, excluding depreciation Accelerated depreciation rate Year 1 Year 2 4,200 4,100 $29.82 $30.00 $12.15 $13.45 $41,000 $41,670 33% 45% When using acc lerated depreciation, project's net present This project will require an investment of $10,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Hungry Whale Electronics pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using straight-line depreciation, the project's NPV is Using the Year 3 4,300 $30.31 $14.02 $41,890 15% Year 4 4,400 $33.19 $14.55 $40,100 7% (NPV) is depreciation method will result in the greater NPV for the project.
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
Problem 1PS
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