D
Damncar2002
Guest
...project’s NPV...Assuming:? Rocky atop 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 depreciation 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.
REQUIRED: If the number of cars washed declined by 50 % from the expected level, by how much would the project’s net present value change? (The cash flows are reported by the company as being constant in years 1-3.
WACC 10.00%
Net investment cost (depreciable basis) $60,000
Number of cars washed 2,800
Average price per car $25.00
Fixed operating costs excluding depreciation $10,000
Variable operating costs/unit
(i.e. per car washed) $5.357
Annual depreciation $20,000
Tax rate 35.00%
REQUIRED: If the number of cars washed declined by 50 % from the expected level, by how much would the project’s net present value change? (The cash flows are reported by the company as being constant in years 1-3.
WACC 10.00%
Net investment cost (depreciable basis) $60,000
Number of cars washed 2,800
Average price per car $25.00
Fixed operating costs excluding depreciation $10,000
Variable operating costs/unit
(i.e. per car washed) $5.357
Annual depreciation $20,000
Tax rate 35.00%