Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
Kent Duncan Is exploring the possibility of opening a self - service car wash and operating it for the next five years untll he retires.
Kent Duncan Is exploring the possibility of opening a selfservice car wash and operating it for the next five years untll he retires. He has gathered the following Information: a A bullding in which a car wash could be installed is avallable under a fiveyear lease at a cost of $ per month. b Purchase and Installation costs of equipment would total $ In five years the equipment could be sold for about of Its original cost. c An Investment of an additional $ would be required to cover working capltal needs for cleanling supplies, change funds, and so forth. After five years, this working capltal would be released for Investment elsewhere. d Both a wash and a vacuum service would be offered. Each customer would pay $ for a wash and $ for access to a vacuum cleaner. e The only varlable costs assoclated with the operation would be cents per wash for water and cents per use of the vacuum for electricity. f In addition to rent, monthly costs of operation would be: cleaning, $; Insurance, $; and malntenance, $ g Gross recelpts from the wash would be about $ per week. According to the experlence of other car washes, 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 return. Click here to view Exhiblt B and Exhiblt B to determine the approprlate discount factors using tables. Requlred: Assuming that the car wash will be open weeks a year, compute the expected annual net cash recelpts from its operation. a What is the net present value of the Investment in the car wash? b Would you advise Mr Duncan to open the car wash? Complete this question by entering your answers in the tabs below. Assuming that the car wash will be open weeks a year, compute the expected annual net cash receipts from its operation.
Kent Duncan Is exploring the possibility of opening a selfservice car wash and operating it for the next five years untll he retires. He
has gathered the following Information:
a A bullding in which a car wash could be installed is avallable under a fiveyear lease at a cost of $ per month.
b Purchase and Installation costs of equipment would total $ In five years the equipment could be sold for about of Its
original cost.
c An Investment of an additional $ would be required to cover working capltal needs for cleanling supplies, change funds, and
so forth. After five years, this working capltal would be released for Investment elsewhere.
d Both a wash and a vacuum service would be offered. Each customer would pay $ for a wash and $ for access to a vacuum
cleaner.
e The only varlable costs assoclated with the operation would be cents per wash for water and cents per use of the vacuum for
electricity.
f In addition to rent, monthly costs of operation would be: cleaning, $; Insurance, $; and malntenance, $
g Gross recelpts from the wash would be about $ per week. According to the experlence of other car washes, 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 return.
Click here to view Exhiblt B and Exhiblt B to determine the approprlate discount factors using tables.
Requlred:
Assuming that the car wash will be open weeks a year, compute the expected annual net cash recelpts from its operation.
a What is the net present value of the Investment in the car wash?
b Would you advise Mr Duncan to open the car wash?
Complete this question by entering your answers in the tabs below.
Assuming that the car wash will be open weeks a year, compute the expected annual net cash receipts from its operation.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started