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 10%, what is the net present value (NPV) of this project?
A) -$135,493
B) -$143,021
C) $165,603
D) $150,548

Question

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 10%, what is the net present value (NPV) of this project?
A) -$135,493 
B) -$143,021 
C) $165,603 
D) $150,548

Quizplus · Accepted Answer

D) CF1 = -7410 + 75,000 + 5,000 = 72,590;
CF2 and 3 = 90,090 + 75,000 + 5,000 = 170,090;
CF4 = 60,840 + 75,000 + 5,000 = 140,840;
Using a financial calculator, CF0 = -280,000, CF1 = 72,590, CF2 = 170,090,
CF3 = 170,090, CF4 = 140,840; calculating NPV at 10% = $150,548.

A Garage Is Installing a New "Bubble-Wash" Car Wash