**Project Financial Analysis for "Bubble-Wash" Car Wash Installation**This document provides a detailed financial projection over four years (Years 1 to 4) for a new “bubble-wash” car wash being installed by a garage. This car wash aims to attract families by promoting it as a fun activity, with an expectation of boosting sales in the medium term.**Financial Projections Overview:**1. **Revenues:** - Year 1: \$140,000 - Year 2: \$440,000 - Year 3: \$440,000 - Year 4: \$350,0002. **Cost of Goods Sold (COGS):** - Year 1: \$70,000 - Year 2: \$220,000 - Year 3: \$220,000 - Year 4: \$175,0003. **Gross Profit:** - Formula: Revenues - Cost of Goods Sold - Year 1: \$70,000 - Year 2: \$220,000 - Year 3: \$220,000 - Year 4: \$175,0004. **Selling, General and Administrative Expenses:** - Each year incurs a cost of \$6,400.5. **Depreciation:** - A fixed annual depreciation cost of \$75,000 from Year 1 to Year 4.6. **Earnings Before Interest and Taxes (EBIT):** - Formula: Gross Profit - Selling, General and Admin Expenses - Depreciation - Year 1: -\$11,400 - Year 2: \$138,600 - Year 3: \$138,600 - Year 4: \$93,6007. **Income Tax (35%):** - Tax on EBIT. - Year 1: \$3,990 - Year 2: -\$48,510 - Year 3: -\$48,510 - Year 4: -\$32,7608. **Incremental Earnings:** - Formula: EBIT - Income Tax - Year 1: -\$7,410 - Year 2: \$90,090 - Year 3: \$90,090 - Year 4

Net Present Value: It is a method used in capital budgeting to determine the project's absolute…

Answered: A garage is installing a new…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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