Question
Need answer ASAP please! Raul and Maria, now in their late 50s began to envision a retirement where they would slow down. Their plan was
Need answer ASAP please!
Raul and Maria, now in their late 50s began to envision a retirement where they would slow down. Their plan was to transition day-to-day operation of Muddy Waters to their children. They would continue to draw a combined salary of $78,000. With only $250,000 remaining in their retirement savings after Rauls recent battle with cancer, Muddy Waters was their only hope for a comfortable retirement. For years, commercial real estate developers have been buying the desert land all around Muddy Waters to build fast food and quick service restaurants, convenience stores and even a dollar store, but no one expressed interest in Muddy Waters - until today. While Maria was out of the office, a representative from big box retailer, BigBox, approached Raul and offered him $1.85 million dollars for Muddy Waters. The deal includes all 20 acres with the intention of levelling (tearing down) the business in order to build a massive 180,000 square foot hyper-market to sell groceries and general merchandise. While Raul was excited to share the good news with Maria, he decided to wait and discuss the offer with her in person.
Based off the Following Information, fill in the excel charts.
Revenue:
Average revenue per car wash $14.00
Forecasted annual volume growth in carwashes 3 percent
Expenses:
Current variable costs per carwash
Utilities (Elec/gas/water) $0.88
Detergents/chemicals 0.64
Maintenance costs 0.47
Site labor 1.34
Total Variable Costs $3.33
Fixed costs per carwash (Based on 37,500 carwashes)
Salaries $5.60
Insurance 0.40
Operating costs 0.84
Advertising 0.62
Depreciation (current) 0.00**
Total Fixed Costs 7.46
Total $10.79
*No net changes in working capital are expected
**New equipment useful life 10 years with no salvage/disposal value- straight-line
***Rate of return (discount rate) 8%
Investment/ Tax Information | |
Interest Rate | 8.00% |
Equipment Investment | $250,000 |
Net book value if sold today | $40,000 |
|
|
Useful Life (Years) | 10 |
Salvage Value | $0 |
Maintenance Cost Decrease Per Car Wash | $0.25 |
|
|
Long Term Capital Gains Tax Rate | 20.00% |
Corporate Income Tax Rate | 21.00% |
Excel Charts:
Breakeven Carwashes Revenue Per Car Wash Current Upgrade Variable Costs Utilities (Elec/Gas/Water) Detergents/Chemicals Maintenance Costs Site Labor Total Variable Costs Contribution Margin Contribution Margin\% Fixed Costs salaries Insurance Operating Costs Advertising Depreciation Total Fixed Costs Breakeven Carwashes Fixed Costs/Contribution Margin Per Car Wash Fixed Costs Contribution Margin Per Car Wash Breakeven in Car Washes Breakeven Dolloars Forecasted After Tax Operating Income \begin{tabular}{|l|l|l|l|l|l|l|l|l|l|l|l|} \hline & 1 & 2 & 3 & 4 & 5 & 6 & z & 8 & 9 & 10 \\ \hline Total Car Washes & & & & & & & & & \\ \hline \end{tabular} Sales Variable Costs: Utilities Chemicals Maintenance Labor Total Variable Costs Contribution Margin CM% Fixed Costs: Salaries Insurance Operating Costs Advertising Depreciation Total Fixed Costs Total Expenses Operating Income Before Tax Income Taxes Operating Income After Tax Operating Income After Tax Depreciation (Non-cash) Change in Cash Discounted Cash Flow if Continue to Operate \begin{tabular}{|l|l|l|l|l|l|l|l|l|l|} \hline1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \\ \hline \end{tabular} Change in Cash After-Tax Cash Received on Sale of Business Discount Factors (Present Value of $1.00 ) Present value of Cash flows Less: initial investement Net Present Value if Upgraded and Sold in 10 Years Breakeven Carwashes Revenue Per Car Wash Current Upgrade Variable Costs Utilities (Elec/Gas/Water) Detergents/Chemicals Maintenance Costs Site Labor Total Variable Costs Contribution Margin Contribution Margin\% Fixed Costs salaries Insurance Operating Costs Advertising Depreciation Total Fixed Costs Breakeven Carwashes Fixed Costs/Contribution Margin Per Car Wash Fixed Costs Contribution Margin Per Car Wash Breakeven in Car Washes Breakeven Dolloars Forecasted After Tax Operating Income \begin{tabular}{|l|l|l|l|l|l|l|l|l|l|l|l|} \hline & 1 & 2 & 3 & 4 & 5 & 6 & z & 8 & 9 & 10 \\ \hline Total Car Washes & & & & & & & & & \\ \hline \end{tabular} Sales Variable Costs: Utilities Chemicals Maintenance Labor Total Variable Costs Contribution Margin CM% Fixed Costs: Salaries Insurance Operating Costs Advertising Depreciation Total Fixed Costs Total Expenses Operating Income Before Tax Income Taxes Operating Income After Tax Operating Income After Tax Depreciation (Non-cash) Change in Cash Discounted Cash Flow if Continue to Operate \begin{tabular}{|l|l|l|l|l|l|l|l|l|l|} \hline1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \\ \hline \end{tabular} Change in Cash After-Tax Cash Received on Sale of Business Discount Factors (Present Value of $1.00 ) Present value of Cash flows Less: initial investement Net Present Value if Upgraded and Sold in 10 YearsStep by Step Solution
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