In five years, kent duncan will retire. he is exploring the possibility of opening a self-service car wash. the car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. after careful study, mr. duncan determined the following:
a building in which a car wash could be installed is available under a five-year lease at a cost of $4,200 per month.
purchase and installation costs of equipment would total $310,000. in five years the equipment could be sold for about 10% of its original cost.
an investment of an additional $6,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. after five years, this working capital would be released for investment elsewhere.
both a wash and a vacuum service would be offered. each customer would pay $1.30 for a wash and $.75 for access to a vacuum cleaner.
the only variable costs associated with the operation would be 7.5 cents per wash for water and 10 cents per use of the vacuum for electricity.
in addition to rent, monthly costs of operation would be: cleaning, $2,700; insurance, $175; and maintenance, $1,735.
gross receipts from the wash would be about $2,730 per week. according to the experience of other car washes, 60% of the customers using the wash would also use the vacuum.
mr. duncan will not open the car wash unless it provides at least a 11% return.
1. assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation.
2-a. determine the net present value using the net present value method of investment analysis.
2-b. would you advise mr. duncan to open the car wash?
1. $49,434 (Net cash inflow from operation)
2a. $94580 (Net present value)
2b. The business should not open
check the attached file for formatted tables
Use the information of cash receipts and various cash expenses prepare the schedule of annual cash flow.
1. Prepare the schedule of annual cash flow using MS-Excel as below:
its kinda hard to answer this when we dont have all the information that we need.
b. condominum i think