Florida Car Wash is considering a new project whose data are described below. The equipment to be employed has a 3-year tax life, would be depreciated on a straight-line basis over the project's 3- year life, and would encompass 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, therefore 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?
Net investment cost (depreciable basis) $60,000
Number of cars washed 2,800
Average price per car $25.00
Fixed op. cost (excl. depreciation) $10,000
Variable op. cost/unit (that is, VC per car washed) $5.375
Annual depreciation $20,000
Tax rate 35.0%