3. A man is considering investing P500,000 to open a semi-automatic auto-washing machine business in a city of 400,000 population. The equipment can wash, on the average, 12 cars per hour, using two men to operate it and to do small amount of hand work. The man plans to hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 days per week, 50 weeks per year. He will pay his employees P15.00 per hour. He expects to charge P22.00 for a car wash. Out-of-pocket miscellaneous cost would be P8,500 per month. He would pay his employees for 2 weeks for vacations each year. Because of the length of his lea investment within 5 years. His capital now is earning 15%, and he is employed at a steady job that pays P20,000 per month. He desires a rate of return of at least 20% on his investment. Would you recommend the investment? he must write off his

3. A man is considering investing P500,000 to open a semi-automatic auto-washing machine business in a city of 400,000 population. The equipment can wash, on the average, 12 cars per hour, using two men to operate it and to do small amount of hand work. The man plans to hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 days per week, 50 weeks per year. He will pay his employees P15.00 per hour. He expects to charge P22.00 for a car wash. Out-of-pocket miscellaneous cost would be P8,500 per month. He would pay his employees for 2 weeks for vacations each year. Because of the length of his lea investment within 5 years. His capital now is earning 15%, and he is employed at a steady job that pays P20,000 per month. He desires a rate of return of at least 20% on his investment. Would you recommend the investment? he must write off his

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A man is considering investing P500, 000 to open a semi-automatic auto-washingbusiness in a city of 400, 000 population. The equipment can wash, on the average, 12 carsper hour, using two men to operate it and to do small amount of hand work. The man plansto hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 daysper week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects tocharge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 permonth.He would pay his employees for 2 weeks for vacations each year. Because of the length ofhis 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 P25, 000 per month. He desires a rate ofreturn of at least 20% on his investment. Would you recommend the investment? Use present and future worth method.
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?
A young mechanical engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows: Materials 160,000 per yearLabor 280,000 per yearOverhead 40,000 + 10 % of sales per yearSelling Expenses 60,000 The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?
A young mechanical engineer is considering establishing his own small company. An investment of ₱400,000 will be required, which will be recovered in 15 years. It is estimated that sales will be ₱800,000 per year and that operating expenses will be as follows: Materials ₱360,000 per yearLabor ₱280,000 per yearOverhead ₱40,000 + 10% of sales per yearSelling Expense ₱60,000 per year The man will give up his regular job paying ₱216,000 per year an devote full time to the operation of the business; this will result in decreasing labor cost by ₱40,000 per year, material cost by ₱28,000 per year and overhead cost by ₱32,000 per year. If the man expects to earn at least 20% of his capital, should he invest? Answer: The man should not invest.
The investors of Smith Autos have put up $500,000 to construct a building and purchase all equipment required to wash cars. The investors expect to earn a minimum return of 10% on their investment. If the money to set up the business had been borrowed from a bank instead, the car wash owners would have paid a 10% interest rate. The car wash is open 50 weeks per year and washes 800 cars per week. Whether operative or not, the company must pay $1,000 per week return to investors and $1,000 per week as insurance. The variable costs for the 800 weekly washes includes $1,000 labour cost and $600 materials cost. There are many car washes of equal quality and service in the area and they charge $5 per car wash. a) Based on your knowledge of the different forms of market structure, do you think Smith Autos should stay in business? Show calculations. b) Graphically represent the company's performance, showing profit or loss. c) Another car wash company operates inside a gated community in the…
Mark Stevens is considering opening a hobby and craft store. He would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. Mark estimates that the annual cash inflow from the business will amount to $100,000. Mark plans to operate the business for only six years. He estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. Mark's discount rate is 16%. All cash flows, except for the initial investment, would occur at the ends of the years. Required: Compute the net present value of this investment.
Mariam Alikozay is considering opening a cold storage refrigeration business. She would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment. Please post in word , not picture
Mariam Alikozay is considering opening a cold storage refrigeration business. She would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment.
Kath is considering investing 500,000.00 to open a Milk Tea Station near a mall. Based on her feasibility study, she can sell 12 large size of milk tea per hour at a price of 25.00 per bottle. She is planning to hire 2 crews, with an hourly rate of 25.00, to manage the store which will operate 8hours per day, 6 days per week, and 50 weeks per year. However, additional out-of-pocket miscellaneous cost is 8,500.00 per month. More so, she wanted to have her crews a 2-week vacation every year with pay. If the capital now is earning 15% annually and she must write off her investment within 5 years with desire rate of return of at least 20% on his investment, would you recommend the investment? Use the rate of return method and annual worth method in making your decision.
A man is considering putting up his own enterprise, where an investment of 800,000Php will be required and will take 15 years to recoup . He estimates his annual sales at 800,000Php along with the following operating costs. Materials ............................. 160,000Php/ yearLabor ............................. 280,000Php/ yearOverhead ............................. (40,000 + 10% of sales) Php/ yearSelling Expense............................. 60,000Php/ yearThe man will give up his regular job paying 216,000 Php per year and devote all his time to the operation of his business, this will result in decreasing his labor cost by 40,000Php per year, material cost by 28,000Php per year and overhead cost by 32,000 Php per year. If the man expects to earn at least 20% of his capital, should he invest? Solve in The rate of return on additional investment method
A young mechanical engineer is considering establishing his own small company. Aninvestment of P400,000 will be required which will be recovered in 15 years. It is estimatedthat sales will be P800,000 per year and that operating expenses will be as follows. (see attached photo) The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?
Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 50 hours each week, the company's EBIT will be $645,000 per year; if he works a 60-hour week, the company's EBIT will be $815,000 per year. The company is currently worth $4.15 million. The company needs a cash infusion of $2.25 million and can issue equity or issue debt with an interest rate of 9 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder?

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