A man is considering investing Php 750,000 to open a semi-automatic auto washing business in the city of 450,000 population. The equipment can wash on average, 12 cars per hour using 2 men to operate it and to do some small amount of hand work. The man plans to hire two additional men in addition to himself and operate the station on an 8-hour basis, 6 days a week and 50 weeks per year. He will pay his employee Php 15 per hour. He expects to charge Php 30 for a car wash. Out of pocket miscellaneous cost would be Php 9,750 per month. He would pay his employees for 2 weeks vacations each year. Because of the length of his lease, he must write off his investment within 5- years. His capital now is earning 15% and he is employed at a steady job that pays 20,000
A man is considering investing Php 750,000 to open a semi-automatic auto washing business in the city of 450,000 population. The equipment can wash on average, 12 cars per hour using 2 men to operate it and to do some small amount of hand work. The man plans to hire two additional men in addition to himself and operate the station on an 8-hour basis, 6 days a week and 50 weeks per year. He will pay his employee Php 15 per hour. He expects to charge Php 30 for a car wash. Out of pocket miscellaneous cost would be Php 9,750 per month. He would pay his employees for 2 weeks vacations each year. Because of the length of his lease, he must write off his investment within 5- years. His capital now is earning 15% and he is employed at a steady job that pays 20,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A man is considering investing Php 750,000 to open a semi-automatic auto washing business in the city of 450,000 population. The equipment can wash on average, 12
cars per hour using 2 men to operate it and to do some small amount of hand work. The man plans to hire two additional men in addition to himself and operate the station on an
8-hour basis, 6 days a week and 50 weeks per year. He will pay his employee Php 15
per hour. He expects to charge Php 30 for a car wash. Out of pocket miscellaneous
cost would be Php 9,750 per month. He would pay his employees for 2 weeks vacations each year. Because of the length of his lease, he must write off his investment within 5-
years. His capital now is earning 15% and he is employed at a steady job that pays
20,000 a month. He desires a rate of return of at least 20% on his investment. Would you recommend the investment?
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