Florida Car Wash Is Considering a New Project Whose Data

question 33

Multiple Choice

Florida Car Wash is considering a new project whose data are shown below.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 change in net operating 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 change? (Hint: Note that cash flows are constant at the Year 1 level,whatever that level is. ) Do not round the intermediate calculations and round the final answer to the nearest whole number.
? $\begin{array}{lr}\text { WACC } & 10.0 \% \\\text { Net investment cost (depreciable basis) } & \$ 60,000 \\\text { Number of cars washed } & 2,960 \\\text { Average price per car } & \$ 25.00 \\\text { Fixed op. cost (excl. depr.) } & \$ 10,000 \\\text { Variable op. costiunit (1.e., VC per car washed) } & \$ 5.375 \\\text { Annual depreciation } & \$ 20,000 \\\text { Tax rate } & 35.0 \%\end{array}$
?

• A) -$37,560
• B) -$37,184
• C) -$39,814
• D) -$38,687
• E) -$36,433

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Definitions:

Motivation

The process that initiates, guides, and maintains goal-oriented behaviors, driving individuals to pursue and achieve their objectives.

Enables People

Empowering or giving individuals the means to achieve goals, perform tasks, or make certain decisions.

Participative Approach

A method or strategy where individuals are encouraged to take part in decision-making processes, often leading to increased engagement and ownership.

Employee Motivation

The level of energy, commitment, and creativity that a company's workers bring to their jobs.