Ch 10 Prob1 Consider the case of Happy Dog Soap: Happy Dog Soap is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year2 Unit sales (units) 3,500 4,000 Sales price $38.50 $39.88 Variable cost per unit $22.34 $22.85 Fixed operating costs except depreciation $37,000 $37,500 Accelerated depreciation rate 33% 45% This project will require an investment of $21,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Happy Dog Soap 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 is (Hint: Round the project's net present value-to the nearest whole dollar. Total sales revenue $159,520 - Total variable costs 78,190 - Total fixed costs 37,000 37,500 - Accelerated depreciation expense 6,750 EBIT or operating income 9,548 - Taxes on operating income After-tax operating income 5,844 $8.766 + Accelerated depreciation expense 6,750 Net cash flows Ch 10 Prob1 Consider the case of Happy Dog Soap: Happy Dog Soap is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year2 Unit sales (units) 3,500 4,000 Sales price $38.50 $39.88 Variable cost per unit $22.34 $22.85 Fixed operating costs except depreciation $37,000 $37,500 Accelerated depreciation rate 33% 45% This project will require an investment of $21,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Happy Dog Soap 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 is (Hint: Round the project's net present value-to the nearest whole dollar. Total sales revenue $159,520 - Total variable costs 78,190 - Total fixed costs 37,000 37,500 - Accelerated depreciation expense 6,750 EBIT or operating income 9,548 - Taxes on operating income After-tax operating income 5,844 $8.766 + Accelerated depreciation expense 6,750 Net cash flows