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Kent Duncon is exploring the possibility of opening o seff-service cor wosh ond operating it for the next five yesra until he tetires. He hos
Kent Duncon is exploring the possibility of opening o seff-service cor wosh ond operating it for the next five yesra until he tetires. He hos gothered the following informotion: 0. A building in which a car wosh could be installed is ovaloble under of five-yeor lesse ot o cost of $3,700 per month. b. Purchase and instaliation costs of equipment would total $255,000. In five yeors the equipment could be sold for about 10% of its originol cost: C. An investment of an additional $4,000 woule be required to cover working copitol needs for clesning supplies, change funds, and so forth. After five years, this working copisi would be relessed for investment elsewhere. d. Both o wash and o vacuum service would be offered. Eoch customer would poy $1.52 for a wash and $.85 for accers to avacuum clesner. e. The only varibble costs ossocioted with the operotion would be 7.5 cents per wosh for woter ond 10 cents per use of the vocutim fo electricity: fin addition to rent, monthly costs of operotion would be: cleaning, $2,200; insurance, $75; and maintenance, $1685. 9 . Gross receipts from the wosh would be obout 52.432 per week. Accoroing to the experience of other cor washes, 608 of the customers using the wosh would olso use the vocuum. Mir. Duncen will not open the cor wsah unless it provides atlesste 129 setum. Requitred: 1 Assuming that the cor wosh witl be open 52 weeks oyear, compute the expected onnuol net cosh recelpta from its operation. 2-0. What is the net present volue of the investment in the cor wosh? 2-b. Would you odvise Mr. Duncen to open the corwoah? Complete this question by entering your answers in the tabs below. What is the net present value of the investment in the car wash? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.)
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