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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 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 has determined the following a. A building in which a car wash could be installed is available under a five-year lease at b. Purchase and installation costs of equipment would total $184,000. In five years the c. An investment of an additional $9,000 would be required to cover working capital a cost of $5,900 per month. equipment could be sold for about 9% of its original cost. needs for cleaning supplies, change funds, and so forth. After five years, this working d. Both a wash and a vacuum service would be offered with a wash costing $1.12 and e. The only variable costs associated with the operation would be 7.5 cents per wash for f. In addition to rent, monthly costs of operation would be: cleaning, $1,400; insurance, e. Gross receipts from the wash would be about $3,024 per week. According to the capital would be released for investment elsewhere the vacuum costing $.70 per use water and 10 cents per use of the vacuum for electricity $75; and maintenance, $1,895 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
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