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Year 1 Year 2 Year 3 Year 4 Sales (units) Sales price 4,200 4,100 4,300 4,400 $29.82 $30.00 Variable cost per unit Fixed costs, excluding depreciation Accelerated depreciation rate $12.15 $13.45 $41,000 $41,670 33% 45% $30.31 $33.19 $14.02 $14.55 $41,890 $40,100 15% 7% . D This project will require an investment of $20,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Black Sheep Broadcasting pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project's net present value (NPV) is When using straight-line depreciation, the project's NPV is Using the depreciation method will result in the greater NPV for the project. No other firm would take on this project if Black Sheep Broadcasting turns it down. How much should Black Sheep Broadcasting 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 $600 for each year of the four-year project? $2,047 $1,861 $1,582 $1,396

Year 1 Year 2 Year 3 Year 4 Sales (units) Sales price 4,200 4,100 4,300 4,400 $29.82 $30.00 Variable cost per unit Fixed costs, excluding depreciation Accelerated depreciation rate $12.15 $13.45 $41,000 $41,670 33% 45% $30.31 $33.19 $14.02 $14.55 $41,890 $40,100 15% 7% . D This project will require an investment of $20,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Black Sheep Broadcasting pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project's net present value (NPV) is When using straight-line depreciation, the project's NPV is Using the depreciation method will result in the greater NPV for the project. No other firm would take on this project if Black Sheep Broadcasting turns it down. How much should Black Sheep Broadcasting 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 $600 for each year of the four-year project? $2,047 $1,861 $1,582 $1,396

Essentials Of Investments
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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Year 1 Year 2 Year 3 Year 4 Sales (units) Sales price 4,200 4,100 4,300 4,400 $29.82 $30.00 Variable cost per unit Fixed costs, excluding depreciation Accelerated depreciation rate $12.15 $13.45 $41,000 $41,670 33% 45% $30.31 $33.19 $14.02 $14.55 $41,890 $40,100 15% 7% . D This project will require an investment of $20,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Black Sheep Broadcasting pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project's net present value (NPV) is When using straight-line depreciation, the project's NPV is Using the depreciation method will result in the greater NPV for the project. No other firm would take on this project if Black Sheep Broadcasting turns it down. How much should Black Sheep Broadcasting 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 $600 for each year of the four-year project? $2,047 $1,861 $1,582 $1,396
Transcribed Image Text:Year 1 Year 2 Year 3 Year 4 Sales (units) Sales price 4,200 4,100 4,300 4,400 $29.82 $30.00 Variable cost per unit Fixed costs, excluding depreciation Accelerated depreciation rate $12.15 $13.45 $41,000 $41,670 33% 45% $30.31 $33.19 $14.02 $14.55 $41,890 $40,100 15% 7% . D This project will require an investment of $20,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Black Sheep Broadcasting pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project's net present value (NPV) is When using straight-line depreciation, the project's NPV is Using the depreciation method will result in the greater NPV for the project. No other firm would take on this project if Black Sheep Broadcasting turns it down. How much should Black Sheep Broadcasting 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 $600 for each year of the four-year project? $2,047 $1,861 $1,582 $1,396
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