4 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 could be dosed easily when he retires Aher careful study. Mr Duncan has determined the following 10 points eBook A building in which a car wash could be installed is available under a five-year lease at a cost of $3,800 per month Purchase and installation costs of equipment would total $140.000. In five years the equipment could be sold for about 9% of its original cost . An investment of an additional $3,000 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 investmenetewhere Both a wash and a vacuum service would be offered with a wash costing $135 and the vacuum costing 50 90 perse . The only variable costs associated with the operation would be 25 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, $2.300; insurance, $75 and maintenance. $1795 Gross receipts from the wash would be about $2,295 per week According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum Print References Mt. Duncan will not open the car wash unless it provides at least 15% return Required: 1. Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from les operation, 0 Auto wash cash receipts Vacuum cash receipts Total cash recept Less cash disbursements Water Electrioty Rant Cleaning Insurance Maintenance Total cash disbursements Annual net cash flow from operations 5 0 0 2-0 Determine the net present value using the net presente method of mestment analytis (Any cash outflows should be indicated by a minus sign. Round the final answers to the nearest whole dollar Less cash disbursements Water Electricity Rent Cleaning Insurance Maintenance Total cash disbursements Annual net cash flow from operations 0 $ 0 2-a. Determine the net present value using the net present value method of investment analysis. (Any cash outflows should be indicated by a minus sign. Round the final answers to the nearest whole dollar) Yearts Amount of Cash Flows Present Value of Cash Flows Cost of the equipment Working capital Net annual cash inflows Working capital release Salvage value Net present value Now Now 1-5 5 5 $ 2-b. Would you advise Mr Duncan to open the car wash? Yes No