Spot-Free Car Wash is considering a new project whose data are 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 a zero salvage value after Year 4. 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 variable cost per unit dropped by 10% from the expected level, by how much would the project's NPV change? (Hint: Note that cash flows are constant at the Year 1 level, whatever that level is.)

Project cost of capital	10%
Net investment cost (depreciable basis)	$60,000
Number of cars washed	2,800
Average price per car washed	$25
Fixed operating costs (excluding depreciation)	$10,000
Variable cost per car washed	$5.5
Tax rate	35%

The final answer is $3,173. Please look at the problem solving below, and explain whats bolded.

Original: [(2,800 $25) (2,800 $5.50) $10,000 $60,000/4] (1 0.35) + $60,000/4 $70,000 15,400 10,000 15,000 = 29,600 (1 0.35) + $15,000 = $34,240 N = 4. I/Y = 10%, PMT = 34240; CPT PV = $108,536

With a 10% reduction in variable costs: [(2,800 $25) (2,800 $5.50 0.9) **WHY IS .9 HERE, WHERE DID THEY GET IT FROM??** $10,000 $60,000/4] (1 0.35) + $60,000/4 $70,000 13,860 10,000 15,000 = 31,140 (1 0.35) + $15,000 = $35,241 N = 4. I/Y = 10%, PMT = 35241; CPT PV = $111,709

$111,709 $108,536 = $3,173