Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Unit sales Sales price Year 1 3,500 $38.50 Year 2 4,000 $39.88 Year 3 4,200 Year 4 4,250 $40.15 $41.55 $22.34 $22.85 $23.67 $23.87 Variable cost per unit Fixed operating costs $37,000 $37,500 $38,120 $39,560 This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. Which of the following most closely approximates what the project's net present value (NPV) would be under the new tax law? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) $58,986.21 $67,834.14 $70,783.45 $47,188.97 Which of the of the following most closely approximates what the project's NPV would be when using straight-line depreciation? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) $73,031.55 $58,425.24 $67,189.03 $55,503.98 Using the depreciation method will result in the highest NPV for the project. No other firm would take on this project if Garida turns it down. Which of the following most closely approximates how much Garida should reduce the NPV of this project, assuming it is discovered that this project would reduce one of its division's net after-tax cash flows by $300 for each year of the four-year project? (Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) $558.44 $791.12 $930.73 $1,023.80

Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs:   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 $41,000 $41,670 $41,890 $40,100   This project will require an investment of $10,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law. Determine what the project’s net present value (NPV) would be under the new tax law. $80,438   $67,032   $77,087   $60,329     Now…

Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the market-based transfer price? • Variable cost per unit $10 • Fixed cost per unit 1.16 • Division B sales price of Component X 14.50

Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 25% transfer price? • Variable cost per unit $6.38 Fixed cost per unit 1.13 • Division B sales price of Component X 14.50