Florida Car Wash Is Considering a New Project Whose Data

question 17

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 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

---

Definitions:

Mode

The number that occurs the most often in a collection of data.

Squared Deviation

The square of the difference between an observed data value and the mean of the data set, used in variance and standard deviation calculations.

Mathematical Average

A statistical measure representing the sum of values divided by their quantity.

Modal Score

The most frequently occurring value in a set of data, which represents the mode.