# Lumbering Ox Truckmakers is co

Lumbering Ox Truckmakers is considering an investment that will have the following sales, variable costs, and fixed operating costs:

Year 1

Year 2

Year 3

Year 4

Sales (units) 3,500 4,000 4,200 4,250
Sales price \$38.50 \$39.88 \$40.15 \$41.55
Variable cost per unit \$22.34 \$22.85 \$23.67 \$23.87
Fixed costs, excluding depreciation \$37,000 \$37,500 \$38,120 \$39,560
Accelerated depreciation rate 33% 45% 15% 7%

This project will require an investment of \$15,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Lumbering Ox Truckmakers 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 ___ .

options: \$38,789, \$43,099, \$49,564, \$51,719

When using straight-line depreciation, the project’s NPV is ____ .

options: \$53,554, \$49,269, \$55,696, \$42,843

Using the ____ depreciation method will result in the greater NPV for the project.

No other firm would take on this project if Lumbering Ox Truckmakers turns it down. How much should Lumbering Ox Truckmakers 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 \$400 for each year of the four-year project?

A. \$1,055

B. \$931

C. \$1,365

D. \$1,241

The project will require an initial investment of \$15,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for \$12,000, after taxes, if the project is rejected. What should Lumbering Ox Truckmakers do to take this information into account?

A. The company does not need to do anything with the value of the truck because the truck is a sunk cost.

B. Increase the amount of the initial investment by \$12,000.

C. Increase the NPV of the project by \$12,000.

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# Lumbering Ox Truckmakers is co

Lumbering Ox Truckmakers is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 4,000 4,200 4,250 Sales (units) Sales price Variable cost per unit 3,500 \$38.50 \$39.88 \$40.15 \$41.55 \$22.34 \$22.85 \$23.67 \$23.87 Fixed costs, excluding depreciation \$37,000 \$37,500 \$38,120 \$39,560 Accelerated depreciation rate 33% 45% 15% 7% This project will require an investment of \$15,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Lumbering Ox Truckmakers 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 \$43,099 When using straight-line depreciation, the project’s NPV is \$42,843 Using the accelerated depreciation method will result in the greater NPV for the project. No other firm would take on this project if Lumbering Ox Truckmakers turns it down. How much should Lumbering Ox Truckmakers 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 \$300 for each year of the four-year project? O \$559 O \$931 O \$791 O \$1,024 The project will require an initial investment of \$15,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for \$14,000, after taxes, if the project is rejected. What should Lumbering Ox Truckmakers do to take this information into account? Increase the amount of the initial investment by \$14,000. O Increase the NPV of the project by \$14,000. The company does not need to do anything with the value of the truck because the truck is a sunk cost. Grade It Now Save & Continue Continue without saving

### Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

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