Florida Car Wash Is Considering a New Project Whose Data $\text { Currrent NPV }$

question 52

Multiple Choice

Florida Car Wash is considering a new project whose data are shown below.
$\text { Currrent NPV }$
$\begin{array}{|l|c|c|c|c|}\hline \text { Year } & 0 & 1 & 2 & 3 \\\hline \text { Sales } & & 70000 & 70000 & 70000 \\\hline \text { Less: VC } & & 15050 & 15050 & 15050 \\\hline \text { Less: Dep } & & 20000 & 20000 & 20000 \\\hline \text { Less: Fixed Cos: } & & 10000 & 10000 & 10000 \\\hline \text { Profit Befor Tax } & & 24950 & 24950 & 24950 \\\hline \text { Less: Tax } & & 8732.5 & 8732.5 & 8732.5 \\\hline \text { Profit After Tax } & & \$ 16,217.50 & 16217.5 & 16217.5 \\\hline \text { Add Dep } & & 20000 & 20000 & 20000 \\\hline \text { Cash Flow } & & 36217.5 & 36217.5 & 36217.5 \\\hline \text { Investment } & (\$ 60,000) & & & \\\hline \text { Net Cash Flow } & (\$ 60,000) & 36217.5 & 36217.5 & 36217.5 \\\hline \text { PV Factor } & 1 & 0.9091 & 0.8264 & 0.7513 \\\hline \text { PV Factor } & (\$ 60,000) & \$ 32,925 & \$ 29,931.82 & \$ 27,210.74\\\hline \\\hline\text { NVP } &\$30,067.56\\\hline\end{array}$

$\text { Project NPV }$
$\begin{array}{|l|c|c|c|c|}\hline \text { Year } & 0 & 1 & 2 & 3 \\\hline \text { Sales } & & 42000 & 42000 & 42000 \\\hline \text { Less: VC } & & 9030 & 9030 & 9030 \\\hline \text { Less: Dep } & & 20000 & 20000 & 20000 \\\hline \text { Less: Fixed Cost } & & 10000 & 10000 & 10000 \\\hline \text { Profit Befor Tax } & & 2970 & 2970 & 2970 \\\hline \text { Less: Tax } & & 1039.5 & 1039.5 & 1039.5 \\\hline \text { Profit After Tax } & & \$ 1,930.50 & \$ 1,930.50 & \$ 1,930.50 \\\hline \text { Add Dep } & & 20000 & 20000 & 20000 \\\hline \text { Cash Flow } & & 21930.5 & 21930.5 & 21930.5 \\\hline \text { Investment } & (\$ 60,000) & & & \\\hline \text { Net Cash Flow } & (\$ 60,000) & 21930.5 & 21930.5 & 21930.5 \\\hline \text { PV Factor } & 1 & 0.9091 & 0.8264 & 0.7513 \\\hline \text { PV Factor } & (\$ 60,000) & 19936.818 & 18124.38 & 16476.709 \\\hline\\\hline\text { NPV } & (\$ 5,462.09) \\\hline\end{array}$
The equipment to be used has a 3-year tax life, would be depreciated on a straight-line basis over the project's 3-year life, and would have a zero salvage value after Year 3.No new working capital would be required.Revenues and other operating costs will be constant over the project's life, and this is just one of the firm's many projects, so any losses on it can be used to offset profits in other units.If the number of cars washed declined by 40% from the expected level, by how much would the project's NPV decline? (Hint: Note that cash flows are constant at the Year 1 level, whatever that level is.)

• A)$28,939
• B)$30,462
• C)$32,066
• D)$33,753
• E)$35,530

Understand the importance and methodology of job analysis in identifying candidate suitability and job requirements.

Appreciate the legal frameworks protecting employees against workplace discrimination and the role of key legislation.

Recognize the role of leadership styles and management practices in influencing team dynamics, motivation, and productivity.

Understand the challenges and strategies related to work-life balance, stress management, and workplace violence prevention.

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Definitions:

Taxable Income

The portion of income that is subject to income tax after all deductions, exemptions, and credits are considered.

Tax Liability

The total amount of tax owed by an individual or business entity to taxing authorities like the IRS after accounting for deductions, credits, and exemptions.

Tax Rate Structure

The system of varying tax rates that apply to different levels of income, used by governments to calculate tax liability.

Regressive

pertains to a tax system where the tax rate decreases as the taxable amount increases, meaning lower-income individuals pay a higher percentage of their income compared to higher-income individuals.