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11. What will be below project NPV if the sales drops 30%? Make a Sensitivity analysis. Project life is 3 years with 100% Depreciation bonus. WACC Equipment cost Required net operating working capital (NOWC) 10.0% $75,000 $15,000 Annual sales revenues Annual operating costs Tax rate $73,000 $25,000 25.0% WACC -10.0% Equip Cost (1-T) Investment in NOWC Sales revenues - Operating costs -$56,250 -$15,000 $73,000 25,000 $73,000 25,000 $73,000 25,000 Operating income (EBIT) - Taxes EBIT(1 - T) rate 25.0% $48,000 12,000 $36,000 $48,000 12.000 $36,000 $48,000 12.000 $36,000 Recovery of NOWC Project CFs -S71,250 $36,000 $36,000 15,000 $51,000 What is the NPV of this project? What is the NPV with 30% drop in sales? 3- Which of the following statements is CORRECT? a. Since depreciation is not a cash expense, and since cash flows and not accounting income are the relevant input, depreciation plays no role in capital budgeting, b. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 3 years or longer. c. If firms use bonus depreciation, they will write off assets slower than they would under straight-line depreciation, and as a result projects' forecasted NPVs would normally be lower than they would be if straight-line depreciation were required for tax purposes.. d. If firms use bonus depreciation, they can write off assets faster than they could under straight- line depreciation, and as a result projects' forecasted NPVs would normally be lower than they would be if straight-line depreciation were required for tax purposes. e. If firms use bonus depreciation, they can write off assets faster than they could under straight- line depreciation, and as a result projects' forecasted NPVs would normally be higher than they would be if straight-line depreciation were required for tax purposes