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cassandra_dan cassandra_dan
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A year ago
Rocky Top Car Wash is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over the project’s 3-year life, and would have zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 3-year life. This is just one project for the firm, so any losses can be used to offset gains on other firm projects. If the number of cars washed declined by 50% from the expected level, by how much would the project’s NPV change? (Hint: Cash flows are constant in Years 1 to 3.)

WACC

10%

Net capital investment cost

$75,000

Number of cars washed

3,400

Average price per car

$30

Fixed cash operating cost

$11,000

Variable op. cost/unit (i.e., per car washed)

$5.294

Annual capital cost allowance

$25,000

Tax rate

35%



$65,423



$66,119



$67,891



$68,453

Textbook 
 Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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eeemmmeeemmm
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cassandra_dan Author
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A year ago
Thank you, thank you, thank you!
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Correct Slight Smile TY
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2 hours ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
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