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Answer should be -556.1 Collins Car Wash is considering renewing a project with projected data shown below. The equipment to be used would be depreciated
Answer should be -556.1
Collins Car Wash is considering renewing a project with projected data shown below. The equipment to be used would be depreciated on a straight-line basis over the project's 4-year life and would have zero salvage value after Year 4. No new working capital would be required. Revenues and 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. The capital budgeting figures provided did not take into consideration expected inflation trends and the impact on your expected results. You expect your variable and fixed costs (except depreciation) are expected to increase by 9% each. The company's cost of capital is also expected to increase by 9 percent (e.g., a 10 percent increase in the WACC currently at 6% would be 6.6% (6\% 1.10) ). To offset these higher costs the firm is considering a 9% increase in the price per car wash, which would also reduce the demand for car washes by 99%. By how much (in \$ thousands, rounded to one decimal place, e.g., 23.4) would these expected changes affect the NPV of the project? If the NPV is expected to decline, please include a negative sign in front of your resultStep by Step Solution
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