Question: I need an answer for this textbook question. I found a sample answer, but I don't understand it. I think it's wrong. Thank you! Question

 I need an answer for this textbook question. I found a

I need an answer for this textbook question. I found a sample answer, but I don't understand it. I think it's wrong. Thank you!

sample answer, but I don't understand it. I think it's wrong. Thank

Question '3': Ohio Building Products {DEF} is considering the launch of a new product which would require an initial investment in equipment of $30,301] (no investment in working capital is required}. The forecast prots from the product are as follows: No cash ows are forecast after year 2, and the equipment will have no salvage value. The cost of capital is 111%. a. What is the project's NPV'? h. Calculate the expected EVA and the return on investment in each of years 1 and 2. c. Why.r does EVA decline hehseen years 1 and 2, whereas the return on investment is unchanged? d. Calculate the present value of the economic value added. How does this gure compare with the project NPV? e. What would he the return on investment and EVA if OBP chooses instead to depreciate the investment straight line? Do you think that this would provide a hetler standard for measuring subsequent performance

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