I need 12.7 solved please. Thank you yuul lihe (ignore the half-year convention

Question

I need 12.7 solved please. Thank you yuul lihe (ignore the half-year convention for the straight-line me ule cost of the equipment would be depreciated evenly applicable MACRS depreciation rates are 33%, 45%, 15%, and 7 %, Appendix 12A. The company's WACC is 8%, and its tax rate is 35% a. What would the depreciation expense be b. Which depreciation method would produce the higher NPV, and how much higher method). The as discussed in each year under each method? would it be? 12-7 SCENARIO ANALYSIS Huang Industries is considering a proposed project whose estimat million. This estimate assumes that economic conditions will be "average." NPV is $12 However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession Below average Average Above average Boom 0.05 0.20 0.50 0.20 0.05 ($70 million) (25 million) 12 million 20 million 30 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. the R&D; department. The base price is $140,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 12-8 NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for year class and would be sold after 3 years for $60,000. The applicable depreciation rates 33%, 45%, 15%, and 7%, as discussed in Appendix 12A. The equipment would require d care the firm $50,000 per year in before-tax nt onerating working capital (spare parts inventory). The project

Explanation / Answer

Expected NPV = $3 million

Standard Deviation = 23.62

Coefficient of Variance = 0.127

Project's Expected NPV: Economic Scenario Probability (P) NPV P * NPV Recession 0.05 -70 -3.5 Below Average 0.2 -25 -5 Average 0.5 12 6 Above Average 0.2 20 4 Boom 0.05 30 1.5 3 Expected NPV 3 Standard Deviation: Economic Scenario NPV (x) x-expected NPV (x-Expected)^2 Probability (P) P * (x-expected)^2 Recession -70 -73 5329 0.05 266.45 Below Average -25 -28 784 0.2 156.8 Average 12 9 81 0.5 40.5 Above Average 20 17 289 0.2 57.8 Boom 30 27 729 0.05 36.45 7212 558 Standad Deviation 558^(1/2) 23.62202362 Coefficient of Variance Mean / Standard Deviation 3/23.622 0.127000254

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