Spot-Free Car Wash Is Considering a New Project Whose Data

question 32

Multiple Choice

Spot-Free 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.) $$\begin{array} { l r } \text { WACC } & 10.0 \% \\\text { Net investment cost (depreciable basis) } & \$ 60,000 \\\text { Number of cars washed } & 2,800 \\\text { Average price per car } & \$ 25.00 \\\text { Fixed op. cost (excl. deprec.) } & \$ 10,000 \\\text { Variable op. costunit (i.e., VC per car washed) } & \$ 5.375 \\\text { Annual depreciation } & \$ 20,000 \\\text { Tax rate } & 35.0 \%\end{array}$$

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

Comprehend the challenges of classifying and reducing climate change costs within current environmental cost tiers.

Identify and describe the six capitals as defined in the International Integrated Reporting Framework.

Understand eco-intensity measures and their importance in sustainability.

Recognize the mutual influence between stakeholders and an organization's environmental and social practices.

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Definitions:

Split-off Point

The stage in a production process where joint products can be recognized as separate products.

Premium Grade

A classification indicating that a product or material is of superior quality and usually commands a higher price.

Industrial Fiber

A material, often synthetic, designed for use in industrial applications due to its strength, durability, or specific functional properties.

Cane Juice

The liquid extract obtained from pressing sugarcane, commonly used as a sweetener or in beverages, not directly a key term in financial or accounting contexts.