Question $6$

Jones Car Wash is considering a new project whose data are shown below. The equipment that would be used has a $3-$year tax

life, would be depreciated by the straight line method over the project's $3$ year life, and would have zero salvage value. No new

working capital would be required. Revenues and other operating costs are expected to be constant over the project's $3-$year life.

If the number of cars washed declined by $50\%$ from the expected level, by how much would the project's NPV change? $($Hint:

Cash flows are constant in Years $1-3.)$

WACC $10\%$

Net equipment cost $($depreciable basis$),$$$60,000$

Annual depreciation $$20,000$

Number of cars washed $,2,800$

Average price per car $$25$

Operating costs excl. depr'n $$25,000$

Tax rate $,35\%$

$-$$$74,781$

$-$$$78,385$

$-$$$82,578$

$-$$$85,713$

$-$$$56,576$