Sylvester Media Is Analyzing an Average-Risk Project,and the Following Data

question 46

Multiple Choice

Sylvester Media is analyzing an average-risk project,and the following data have been developed.Unit sales will be constant,but the sales price should increase with inflation.Fixed costs will also be constant,but variable costs should rise with inflation.The project should last for 3 years,it will be depreciated on a straight-line basis,and there will be no salvage value.This is just one of many projects for the firm,so any losses can be used to offset gains on other firm projects.The marketing manager does not think it is necessary to adjust for inflation since both the sales price and the variable costs will rise at the same rate,but the CFO thinks an adjustment is required.What is the difference in the expected NPV if the inflation adjustment is made vs.if it is not made? $\begin{array}{lr}\text { WACC } & 10.0 \% \\\text { Net investment cost (depreciable basis) } & \$ 200,000 \\\text { Units sold } & 50,000 \\\text { Average price per unit, Year 1 } & \$ 25.00 \\\text { Fixed op. cost excl. deprec. (constant) } & \$ 150,000 \\\text { Variable op. cost/unit, Year 1 } & \$ 20.20 \\\text { Annual depreciation rate } & 33.333 \% \\\text { Expected inflation } & 4.00 \% \\\text { Tax rate } & 35.0 \%\end{array}$

• A) $13,286
• B) $13,985
• C) $14,721
• D) $15,457
• E) $16,230

Conceptualize the role and calculation of interest cost in pension plans.

Utilize amortization techniques for unrecognized pension gains or losses.

Recognize the impact of changes in the discount rate on pension obligations and expenses.

Comprehend the limitations on pension plan contributions due to tax laws.

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Definitions:

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A category of psychotherapy emphasizing understanding the roots of psychological issues and conflicts through introspection and self-analysis.

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The driving forces behind human actions and behaviors, which can stem from psychological, social, or physiological needs.

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The process of doing something, typically to achieve an aim or handle a problem.