Unit sales Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate Year 1 3,500 $38.50 $22.34 $37,000 33% O $46,463 O $55,756 O $53,432 O $37,170 Year 2 4,000 $39.88 $22.85 $23.67 $37,500 $38,120 45% 15% Year 3 4,200 $40.15 Year 4 4,250 $41.55 $23.87 $39,560 7% 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. McFann 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.)
Unit sales Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate Year 1 3,500 $38.50 $22.34 $37,000 33% O $46,463 O $55,756 O $53,432 O $37,170 Year 2 4,000 $39.88 $22.85 $23.67 $37,500 $38,120 45% 15% Year 3 4,200 $40.15 Year 4 4,250 $41.55 $23.87 $39,560 7% 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. McFann 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
Problem 1PS
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Transcribed Image Text:Unit sales
Sales price
Variable cost per unit
Fixed operating costs except depreciation
Accelerated depreciation rate
O $46,463
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. McFann 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.
O $55,756
Year 1
Year 2
Year 3
3,500
4,000
4,200
$38.50 $39.88 $40.15
$22.34
$22.85 $23.67
$37,000
$37,500 $38,120
33%
45%
15%
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.)
O $53,432
Year 4
O $37,170
4,250
$41.55
$23.87
$39,560
7%
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