external browser 0 launchUrl https 253A 252F 252Fnewconnect mheducation Kent Duncan is exploring the possibility of opening a self service car wash and operating it for the next five years until he retires He has gathered the following information a A building in which a car wash could be installed is available under a five year lease at a cost of $3,900 per month b Purchase and installation costs of equipment would total $240,000 In five years the equipment could be sold for about 7 of its original cost c An investment of an additional $2,000 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 d Both a wash and a vacuum service would be offered Each customer would pay $1 36 for a wash and $ 65 for access to a vacuum cleaner e 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 f In addition to rent, monthly costs of operation would be cleaning $2,400 insurance, $55 and maintenance, $1,825 g Gross receipts from the wash would be about $2 448 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 6 return Click here to view Exhibit 14B 1 and Exhibit 14B 2 to determine the appropriate discount factor(s) using tables Required 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 What is the net present value of the investment in the car wash 2 b Would you advise Mr Duncan to open the car wash Complete this question by entering your answers in the tabs below Req 1 Req 2A Req 2B Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation Adomach pach conninte

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external browser 0 launchUrl https 253A 252F 252Fnewconnect mheducation Kent Duncan is exploring the possibility of opening a self service car wash and operating it for the next five years until he retires  He has gathered the following information  a  A building in which a car wash could be installed is available under a five year lease at a cost of $3,900 per month  b  Purchase and installation costs of equipment would total $240,000  In five years the equipment could be sold for about 7  of its original cost  c  An investment of an additional $2,000 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  d  Both a wash and a vacuum service would be offered  Each customer would pay $1 36 for a wash and $ 65 for access to a vacuum cleaner  e  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  f  In addition to rent, monthly costs of operation would be  cleaning  $2,400  insurance, $55  and maintenance, $1,825  g  Gross receipts from the wash would be about $2 448 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 6  return  Click here to view Exhibit 14B 1 and Exhibit 14B 2  to determine the appropriate discount factor(s) using tables  Required  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  What is the net present value of the investment in the car wash  2 b  Would you advise Mr  Duncan to open the car wash  Complete this question by entering your answers in the tabs below  Req 1 Req 2A Req 2B  Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation  Adomach pach conninte

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Valuation The Art and Science of Corporate Investment Decisions

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Valuation The Art and Science of Corporate Investment Decisions

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