2. A man is considering investing P50,000.00 to open a semi-automatic auto washing business in a city of 250,000 population. The equipment can wash 12 cars per hour, using 2 men to operate it and to do a small amount of hard work. The owner plans to hire 2 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 P2.50 per hour. He expects to charge P2.00 for a car wash. Out-of-pocket miscellaneous costs would be P5,800.00 per year. He would pay his employees for 2 weeks for vacations each year. Because of the length of his lease, he must write off his investment within 5 years. His capital now is earning 12%, and he is employed at a steady job that pays P1,800.00 per month. He desires a rate of return of at least 18% on his investment. Would you recommend the investment?

2. A man is considering investing P50,000.00 to open a semi-automatic auto washing business in a city of 250,000 population. The equipment can wash 12 cars per hour, using 2 men to operate it and to do a small amount of hard work. The owner plans to hire 2 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 P2.50 per hour. He expects to charge P2.00 for a car wash. Out-of-pocket miscellaneous costs would be P5,800.00 per year. He would pay his employees for 2 weeks for vacations each year. Because of the length of his lease, he must write off his investment within 5 years. His capital now is earning 12%, and he is employed at a steady job that pays P1,800.00 per month. He desires a rate of return of at least 18% on his investment. Would you recommend the investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 12P

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