The depreciation for the first year (Year1) is:?

and the after-tax cash flow for the second year (Year 2) is:?

What is the NPV of the Pipeline project?

Should Rocky Mountain Oil and Gas take the project ? (Yes/No)

Rocky Mountain Oil and Gas estimates that if they increase fixed costs to $121,500 (an extra $1500 a year on marketing), they will be able to raise he annual growth rate in sales to 8.75%

What would the NPV be ifthe company did this?

Should the company increase fixed costs to $121,500 in order to raise he annual growth rate in sales to 8.75%?

Rocky Mountain O&G Pipeline Project
Cost of Pipeline Contruction	1,000,000
Cost of Shipping and Installation	100,000
Cost of Buildings & Equipment	190,000
Depreciation (CCA) Rate	20%
Life of Project (Years)	6
Salvage Value	380,436
First Year Sales	675,000
Annual Revenue Growth Rate	6.00%
Variable Costs as % of Revenue	45%
Fixed Costs	120,000
Tax Rate	32%
WACC	12.5%

Answer rating: 100% (QA)

SOLUTION 1 The depreciation for the first year Year 1 is Depreciation Cost of Pipeline Construction ... View the full answer