5. Analysis of an expansion project Hungry Whale Electronics is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Sales (units) 3,500 4,000 4,200 4,250 Sales price $38.50 $39.88 $40.15 $41.55 Variable cost per unit $22.34 $22.85 $23.67 $23.87 $37,000 $37,500 $38,120 $39,560 Fixed costs, excluding depreciation Accelerated depreciation rate 33% 45% 15% 7% This project will require an investment of $15,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Hungry Whale Electronics pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project's net present value (NPV) is When using straight-line depreciation, the project's NPV is Using the depreciation method will result in the greater NPV for the project. No other firm would take on this project if Hungry Whale Electronics turns it down. How much should Hungry Whale Electronics reduce the NPV of this project if it discovered that this project would reduce one of its division's net after-tax cash flows by $500 for each year of the four-year project? $1,318 $1,163 $1,706 $1,551 The project will require an initial investment of $15,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for $4,000, after taxes, if the project is rejected. What should Hungry Whale Electronics do to take this information into account? Increase the NPV of the project by $4,000. Increase the amount of the initial investment by $4,000. The company does not need to do anything with the value of the truck because the truck is a sunk cost