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 $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 original cost c. An investment of an additional $4,000 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 $112 for a wash and $.55 for access to a vacuum cleaner e. The only variable costs associated with the operation would be 75 cents per wash for water and 10 cents per use of the vacuum for electricity 1. In addition to rent, monthly costs of operation would be cleaning, $4,900; insurance, $125; and maintenance, $1,825 9. 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 148.1 and Exhibit 1482. 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 Me Duncan to open the car wash? 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. Reg 1 Reg 2A Req 28 Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation 0 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 receipts from operations 0 5 0 Req2A > es Complete this question by entering your answers in the tabs below. Req1 Reg 2A Reg 28 What is the net present value of the investment in the car wash? (Enter negative amount with a minus sign. Round your findi answer to the nearest whole dollar amount.) Not procent value cos Complete this question by entering your answers in the tabs below. Regi Reg 2A Reg 28 Would you advise Mr. Duncan to open the car wash? Yes ONO
