Florida ar wash is considering a new project whose data are shown below. The equipment to be used has a 3 year 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 would be constant over the projects 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 by 40% from the expected level, by how much would the project's NPV decline.
WACC: 10.0%
Net Investment Cost (depecreciable basis): $60,000
Number of Cars washed: 2,800
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 Rate: 35.0%