0)94&H8Nodeld-236589962;&deploymentld-4899073547620479722239003;&elSBN-9781305;

Question

0)94&H8Nodeld-236589962;&deploymentld-4899073547620479722239003;&elSBN-9781305; EA ,m? 1 MINDTAP Assignment 12-Cash Flow Estimation and Risk Analysis Due Today at 1159 PM CST Garida Co. is considering an investme nt that will have the following sales, variable costs, and fixed operating costs Unit sales Sales price Variable cost per unit Fixed operating costs except depreciation Accelerated depreciation rate 4,800 5,100 5,000 5,120 $22.33 $23.45 $23.85 $24.45 $9.45 $10.85 $11.95 $12.00 $34,875 $32,500 33% $33,450 45% $34,950 15% Determine what the project's net present value (NPV) would be when using accelerated depreciation. 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. Garida 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. $32,596 O $28,974 O $43,462 O $36,218

Explanation / Answer

So Select ...............Option - D .........as correct answer

Question - 2 ...........Using the straight line method

Question - 3

Accelerated method shall produced higher NPV

Question - 4

600 * ( Total of discounting factors at 11% for 4 Years) = 1861.47  

Year -1 Year - 2 Year - 3 Year - 4 Sales ( units * sp) 107184 119595 119250 125184 (-) Variable cost (units * vc) 45360 55335 59750 61440 Contribution 61824 64260 59500 63744 (-) Fixed cost 32500 33450 34950 34875 (-) Depreciation 8250 11250 3750 1750 EBT 21074 19560 20800 27119 (-) Tax 8429.6 7824 8320 10847.6 EAT 12644.4 11736 12480 16271.4 (+) Depreciation 8250 11250 3750 1750 Net cash flow 20894.4 22986 16230 18021.4 Discounting factors @ 11% 0.900901 0.8116224 0.731191 0.658731 Present values of CF 18823.78 18655.953 11867.24 11871.254 Total of the present values 61218.23 Investment 25000 NPV 36218.23

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