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.)
Project cost of capital (r)10.0%
Net investment cost (depreciable basis)$60,000
Number of cars washed2,800
Average price per car$25.00
Fixed op. cost (excl. deprec.)$10,000
Variable op. cost/unit (i.e., VC per car washed)$5.375
Annual depreciation$20,000
Tax rate25.0%
A. $33,391
B. $35,149
C. $36,999
D. $38,946
E. $40,996
Answer: E
You might also like to view...
The Acme Global Corporation needed to hire 30 new advertising sales agents. The applicant pool consisted of 100 African-American males and 100 white males. Of the 200 applicants, Acme Global hired 10 of the African-American males and 20 of the white males. Is there evidence of disparate impact?
A. Yes, the selection rate of 20 percent is less than 80 percent, so the Four-Fifths Rule is not met B. Yes, the selection rate of 5 percent is less than 16 percent, so the Four-Fifths Rule is not met C. No, the selection rate of 20 percent is more than 5 percent, so the Four-Fifths Rule is met D. No, the selection rate of 10 percent is less than 80 percent, so the Four-Fifths Rule is met E. None of the above
Fashions, Inc has 12 shareholders. The company is subject to the Model Act. What officers is Fashions, Inc required to have?
a. A president, secretary, and treasurer b. A president and a secretary, and they can be the same person c. A president, at least one vice-president, a secretary, and a chief financial officer d. Whatever officers are described in the corporate bylaws
ABC analysis is a process for categorizing SKUs according to dollar usage so that managers can focus on items with the highest dollar value
Indicate whether the statement is true or false
Curry Corporation is setting the terms on a new issue of bonds with warrants. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 18 warrants that give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $13.90. A similar straight-debt issue would require a 12.0% coupon. What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000? Do not round your intermediate calculations.
A. 7.12% B. 11.12% C. 9.78% D. 8.89% E. 7.56%