Year 0 Year 1 Year 2 Year 3 Year 4 Revenue 120000 450000 450000 340000 Cost of
Question:
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
| Revenue | 120000 | 450000 | 450000 | 340000 | |
| Cost of Goods Sold |
| -60000 | -225000 | -225000 | 170000 |
| Gross Profit |
| 60000 | 225000 | 225000 | 170000 |
| Selling, General and Admin |
| -6900 | -6900 | -6900 | -6900 |
| Depreciation |
| -74000 | -74000 | -74000 | -74000 |
| EBIT | -20900 | 144100 | 144100 | 89100 | |
| Income tax (35%) |
| 7315 | -50435 | -50435 | -31185 |
| Incremental Earnings | -28215 | 93665 | 93665 | 57915 | |
|
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| Capital Purchaes | -280,000 |
| |||
| Change to NWC | -5,000 | -5,000 | -5,000 | -5,000 |
A garage is installing a new "bubble-wash" car wash. It will promote the car wash as a fun activity for the family, and it is expected that the novelty of this approach will boost sales in the medium term. If the cost of capital is
9%,
by using the data in the table above, calculate the net present value (NPV) of this project.
A.
$128,020
B.
$156,468
C.
$135,132
D.
142,244
Expert Answer:
