Solution 1:
Computation of expected annual cash receipt from operation | ||
Particulars | Amount | |
Autowash cash receipt | $141,960.00 | |
Vacuum cash receipt ($2,730/1.30*0.75*60%*52) | $49,140.00 | |
Total cash receipt | $191,100.00 | |
Less: Cash disbursements: | ||
Water ($2,730 / 1.30 * 0.075*52) | $8,190.00 | |
Electricity ($2,730/1.30*60%*0.10*52) | $6,552.00 | |
Rent | $50,400.00 | |
Cleaning | $32,400.00 | |
Insurance | $2,100.00 | |
Maintenance | $20,820.00 | |
Total cash disbursements | $120,462.00 | |
Annual net cash flow from operations | $70,638.00 |
Solution 2a:
Computation of NPV | ||||
Particulars | Period | Amount | PV Factor | Present Value |
Cash outflows: | ||||
Cost of equipment | 0 | $310,000 | 1 | $310,000 |
Working capital | 0 | $6,000 | 1 | $6,000 |
Present value of cash outflows (A) | $316,000 | |||
Cash Inflows: | ||||
Annual cash inflows | 1-5 | $70,638 | 3.696 | $261,078 |
Salvage value | 5 | $31,000 | 0.593 | $18,383 |
Release of working capital | 5 | $6,000 | 0.593 | $3,558 |
Present value of cash inflow (B) | $283,019 | |||
NPV (B-A) | -$32,981 |
Solution 2b:
As NPV is negative, Mr. Duncan should not open the car wash.
In five years. Kent Duncan will retire. He is exploring the possibility of opening a self-service...
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 building in which a car wash could be installed is available under a five-year lease at a cost of $3,400 per month. Purchase and installation costs of...
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 building in which a car wash could be installed is available under a five-year lease at a cost of $4,900 per month. Purchase and installation costs of...
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 building in which a car wash could be installed is available under a five-year lease at a cost of $5,700 per month. Purchase and installation costs of equipment...
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 $4,200 per month. b. Purchase and installation...
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 building in which a car wash could be installed is available under a five-year lease at a cost of $3,400 per month. Purchase and installation costs of...
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 $5,800 per month. b. Purchase and installation...
In five years, Kent Duncan will retire. He is explorong 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 $5,700 per month b. Purchase and installation...
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 building in which a car wash could be installed is available under a five-year lease at a cost of $1,700 per month.Purchase and installation costs of equipment would...
solution to just question 2 (a) please with explanations. thanks 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...
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 building in which a car wash could be installed is available under a five-year lease at a cost of $3,900 per month. Purchase and installation costs of...