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Bernie has also told you that the as a result of producing 10' and 12 pipes in house your sales of existing pipes are likely to increase. He provided you with several estimates of the expected increase in operating profit (i.e., profit before depreciation, interest and taxes, also referred to as taxable income or EBIT (earnings before intere and tax)): there is a 25% chance of $1,000 increase, 50% of $2.000 increase, 25% of $4,000 increase. Bernie thinks that it is best to use the most likely outcome and he said that these incremental profits will occur each year of the new project's life (remember the project has a 5 year life). Would this influence the NPV of producing 10' and 12' pipes in-house? If so, how? Yes, this would increase the NPV of this project by about $8,529, given the $2,250 annual increase in sales Yes, this would increase the NPV of this project by about $7,582, given the $2.000 annual increase in sales Yes, this would decrease the NPV of the project related to the production of the 10 and 12 pipes in-house as it would increase the sales of other pipes No, this would not influence the NPV of this project as only the changes to the 10' and 12 pipes should be taken into account Yes, this would increase the NPV of this project by about $5,118, given the $2,250 annual increase in sales Bernie has also told you that the as a result of producing 10' and 12 pipes in house your sales of existing pipes are likely to increase. He provided you with several estimates of the expected increase in operating profit (i.e., profit before depreciation, interest and taxes, also referred to as taxable income or EBIT (earnings before intere and tax)): there is a 25% chance of $1,000 increase, 50% of $2.000 increase, 25% of $4,000 increase. Bernie thinks that it is best to use the most likely outcome and he said that these incremental profits will occur each year of the new project's life (remember the project has a 5 year life). Would this influence the NPV of producing 10' and 12' pipes in-house? If so, how? Yes, this would increase the NPV of this project by about $8,529, given the $2,250 annual increase in sales Yes, this would increase the NPV of this project by about $7,582, given the $2.000 annual increase in sales Yes, this would decrease the NPV of the project related to the production of the 10 and 12 pipes in-house as it would increase the sales of other pipes No, this would not influence the NPV of this project as only the changes to the 10' and 12 pipes should be taken into account Yes, this would increase the NPV of this project by about $5,118, given the $2,250 annual increase in sales

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