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. A building in which a car wash could be installed is available under a five-year lease at a cost of $5.600 per month. b. Purchase and installation costs of equipment would total $240,000. In five years the equipment could be sold for about 10% of its c. An investment of an additional $4.000 would be required to cover working capital needs for cleaning supplies, change funds, and d. Both a wash and a vacuum service would be offered. Each customer would pay $1.12 for a wash and $.55 for access to a vacuum 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 f. In addition to rent, monthly costs of operation would be cleaning, $4.900; insurance, $125; and maintenance. $1,825. g. Gross receipts from the wash would be about $3.472 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 12% return Click here to view Exhibit 138.1 and Exhibit38-2. to determine the appropriate discount factors) 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 2-3. Determine the net present value using the not present value method of investment analysis 2-6. Would you advise Mr. Duncan to open the car wash? Complete this question by entering your answers in the tabs below. Req: Reg 2 Req 20 Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation S Auto wash cash receipts Vacuum cash receipts Total cash receipts Less cash disbursements: Water 180,544 53,100 233,740 $ 12,090 Mr. Duncan will not open the car wash unless it provides at least a 12% return Click here to view Exhibit 13B-1 and Exhibit 13B-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. Determine the net present value using the net present value method of investment analysis. 2-6. Would you advise Mr. Duncan to open the car wash? Complete this question by entering your answers in the tabs below. Req1 Reg 21 Red 28 Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation. 180,544 53, 196 233.740 S Auto wash cash receipts Vacuum cash receipts Total cash receipts Less cash disbursements: Water Electricity Rent Cleaning Insurance Maintenance Total cash disbursements Annual net cash flow from operations 12.000 9,672 67,200 58.800 1,500 21.900 171.102 62.578 $ Req 2A > ning suppiles, change funds, and ve 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 $1.12 for a wash and $.55 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 t. In addition to rent, monthly costs of operation would be cleaning. $4.900; Insurance, $125: and maintenance. $1,825 g. Gross receipts from the wash would be about $3,472 per week. According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum. ok ances Mr. Duncan will not open the car wash unless it provides at least a 12% return. Click here to view Exhibit:138-1 and Exhibit 138-2. to determine the appropriate discount factors) 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. 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? Complete this question by entering your answers in the tabs below. Reg! Reg 2 Reg 26 Determine the net present value using the net present value method of investment analysis. (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value 201)
