Question

Suppose you just finished analyzing a 5-year capital investment, but you get a call from the...

Suppose you just finished analyzing a 5-year capital investment, but you get a call from the CFO saying the initial cost of the equipment will be $1 million more than expected. How much will NPV change? The equipment is 3-year MACRS property. Assume a 35% marginal tax rate, 12% required return, and no change in salvage value.

The answer is Decline by $718,446

please show the explanation step by step.

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