Question: after examining the npv analysis for a potential project that...
Question details
After examining the NPV analysis for a potential project that would
increase the firm’s output by 5 percent, an analyst’s manager tells
the analyst to increase the initial fixed capital outlay in the
analysis by $462,000. The initial fixed capital outlay would be
fully depreciated on a straight-line basis over a 12-year life,
regardless of whether it is increased. If the firm’s average tax
rate is 28 percent, its marginal tax rate is 35 percent, and the
required rate of return is 10 percent, what is the effect of the
adjustment on the project NPV?
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