Happy Nails is a locally owned nail salon that is in its first year of business. The nail salon employs 8 nail technicians that are
$31,250 each and the owner's is paid $75,000. If the owner did not own Happy Nails, she would work for a competitor for $85 the beginning of the year, the building and the salon equipment are worth $100,000 and at the end of the year, they are worth The accountant for Happy Nails uses straight- line depreciation for the 15- year life of the building and salon equipment. The table above provides some additional information on revenue and the opportunity cost of using the building and equipment.
-Refer to the table above. What is the value of D?

Question

Quizplus · Accepted Answer

To determine the value of D, we need to use the straight-line depreciation formula:
D = (initial value - ending value) / useful life
D = (100,000 - 90,000) / 15
D = $6,666.67

The best choice would be to continue operating Happy Nails because it generates a net income of $125,000 ($200,000 in revenue - $75,000 owner's salary) and has a positive net present value of $30,503.89.

Happy Nails Is a Locally Owned Nail Salon That Is