A project manager is evaluatin

A project manager is evaluating a
project and initially forecasts that the project will lasts for four years and
has its annual marketing and support costs of $1,000,000 and its annual revenue
of $10,000,000. The project pays a 40% tax rate on its pre-tax income and its
cost of capital is 15%. While analysing a situation that competitors can run
their big promotion programs during the project’s life, the manager proposes
one solution to the situation by increasing the marketing and support costs by
60% of the originally forecasted level and simultaneously lowering the
forecasted revenue by 30% of the originally forecasted level. The change in the
net present value (NPV) of the project isclosest to:

A.

-$6,166,753.26

B.

$6,656,717.44

C.

-$6,656,717.44

D.

$6,166,753.26

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