In eight years, Kent Duncan will retire He has $230,000 to invest, and 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, Kent has determined the following PLEASE EXPLAIN YOUR WORK a A building, in which a car wash could be installed, is available under an eight year lease at a cost of $2,100 per month b Purchase and installation costs of equipment would total $230,000 In eight years, the equipment could be sold for about 10 of its original cost c An investment of an additional $5,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth After eight years, this working capital would be released for investment elsewhere d Both a car wash and a vacuum service would be offered, with a wash costing $3 and the vacuum costing 60 cents per use e The only variable costs associated with the operation would be 36 cents per wash for water and 40 cents per use of the vacuum for electricity f In addition to rent, monthly costs of operation would be as follows cleaning, $560 insurance, $80 maintenance, $790 g Gross receipts from the car wash would be about $1,950 per week According to the experience of other car washes, 70 of the customers using the wash would also use the vacuum h Kent will not open the car wash unless it provides at least a 10 return, since this is the amount that could be earned by simply placing the $230,000 in high grade securities Click here to view Exhibit 10 1 and Exhibit 10 2, to determine the appropriate discount factor(s) using tables 1 Assuming that the car wash will be open 52 weeks a year, compute the expected net annual cash receipts (gross cash receipts less cash disbursements) from its operation (Do not include the cost of the equipment, the working capital, or the salvage value in these computations ) what is the net annual cash receipts 2 a Compute the NPV using the method of investment analysis (Round discount factor(s) to 3 decimal places Round other intermediate calculations and final answer to the nearest whole number ) What is the net present value 2b Would you advise Kent to open the car wash Yes No

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In eight years, Kent Duncan will retire. He has $230,000 to invest, and he is exploring the possibility of opening a self-service car wash. The

In eight years, Kent Duncan will retire. He has $230,000 to invest, and 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, Kent has determined the following:

PLEASE EXPLAIN YOUR WORK

a.	A building, in which a car wash could be installed, is available under an eight-year lease at a cost of $2,100 per month.
b.	Purchase and installation costs of equipment would total $230,000. In eight years, the equipment could be sold for about 10% of its original cost.
c.	An investment of an additional $5,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After eight years, this working capital would be released for investment elsewhere.
d.	Both a car wash and a vacuum service would be offered, with a wash costing $3 and the vacuum costing 60 cents per use.
e.	The only variable costs associated with the operation would be 36 cents per wash for water and 40 cents per use of the vacuum for electricity.
f.	In addition to rent, monthly costs of operation would be as follows: cleaning, $560; insurance, $80; maintenance, $790.
g.	Gross receipts from the car wash would be about $1,950 per week. According to the experience of other car washes, 70% of the customers using the wash would also use the vacuum.
h.	Kent will not open the car wash unless it provides at least a 10% return, since this is the amount that could be earned by simply placing the $230,000 in high-grade securities.

Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables.

Assuming that the car wash will be open 52 weeks a year, compute the expected net annual cash receipts (gross cash receipts less cash disbursements) from its operation. (Do not include the cost of the equipment, the working capital, or the salvage value in these computations.)

what is the net annual cash receipts?

2.a Compute the NPV using the method of investment analysis. (Round discount factor(s) to 3 decimal places. Round other intermediate calculations and final answer to the nearest whole number.)

What is the net present value?

2b.

Would you advise Kent to open the car wash?

Yes/No?