I’m having trouble with Q#2 in reading 28. It states if initial outlay was changed by $100,000 and depreciable years changed to 8 instead of 5, then how much will the NPV reduce by. 10% discount rate & 40% tax rate
Instead of going through the NPV calc again, the CFA solution states to just do the change in initial outlay plus the change in depreciation savings. Depr savings is the add’l 100k/8 yrs to get 12,500 * tax rate of 0.4 to get 5000 savings every year. So then it shows -100,000 + sum of PV of 5000/1.10^8 = decrease of 73,325 in NPV. I don’t get this answer. . . they show -100,000 + 26,675 . . . how do they get the 26,674 number?