INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
8th Edition
ISBN: 9781260118742
Author: BREWER
Publisher: MCG
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Chapter 12, Problem 27P
In five years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash The car nib could be managed in the free time be 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 $1,700 per month.
b. Purchase and installation costs of equipment would total $200.000. In five years the equipment could be sold for about 10% of its original cost.
c. An investment of an additional $2,000 would be required to cover
d. Both a wash and a vacuum service would be offered. Each customer would pay $2.00 for a wash and $1.00 for access to a vacuum cleaner.
e. The only variable costs associated with the operation would be 20 cents per wash for water and 10 cents per use of the vacuum for electricity.
f. In addition to rent, monthly costs of operation would be: cleaning. $450; insurance, $75; and maintenance, $500.
g. Gross receipts from the wash would be about $1,350 per week. According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum.
Mr. Duncan will not open the car wash unless it provides at least a 10% return.
Required:
1. Assuming the car wash sill be open 52 weeks a year, compute the expected annual net cash receipts (gross cash receipts less cash disbursements) from its operation. (Do not Include the cost of the equipment, the king capital, or the salvage value in these computations.)
2. What is the net present value of the investment in the car wash? Would you advise Mr. Duncan to open the car wash? Round all dollar figures to the nearest whole dollar.
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Kent Duncan is exploring the possibility of opening a self-service car wash and operating it for the next five years until he retires. He has gathered the following information:
A building in which a car wash could be installed is available under a five-year lease at a cost of $4,700 per month.
Purchase and installation costs of equipment would total $300,000. In five years the equipment could be sold for about 10% of its original cost.
An investment of an additional $3,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After five years, this working capital would be released for investment elsewhere.
Both a wash and a vacuum service would be offered. Each customer would pay $1.15 for a wash and $.70 for access to a vacuum cleaner.
The only variable costs associated with the operation would be 7.5 cents per wash for water and 10 cents per use of the vacuum for electricity.
In addition to rent, monthly costs of operation…
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 has determined the following:
• A building in which a car wash could be installed is available under a five-year lease at a cost of $3,300 per month.
• Purchase and installation costs of equipment would total $126,000. In five years the equipment could be sold for about 10% of its
original cost.
• An investment of an additional $9,500 would be required to cover working capital needs for cleaning supplies, change funds, and
so forth. After five years, this working capital would be released for investment elsewhere.
• Both a wash and a vacuum service would be offered with a wash costing $1.53 and the vacuum costing $0.85 per use.
• The only variable costs associated with the operation would be 7.5 cents per wash…
You are considering buying an old warehouse that you will convert into anoffice building for rental. Assuming that you will own the property for 10 years, how much would you be willing to pay for the old house now given the following financial data?(i) Remodeling cost at period 0 = $550,000;(ii) Annual rental income = $800,000;(iii)Annual upkeep costs (including taxes)= $80,000;(iiii) Estimated net property value (after taxes) at the end of 10 years =$2,225,000;(iiiii)The time value of your money (interest rate)= 8% per year.(a) $4,445,770(b) $5,033,400(c) $5,311,865(d) $5,812,665
Chapter 12 Solutions
INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
Ch. 12.A - Basic Present Value Concepts Annual cash inflows...Ch. 12.A - Basic Present value Concepts Julie has just...Ch. 12.A - Prob. 3ECh. 12.A - Prob. 4ECh. 12.A - Basic Present Value Concepts The Atlantic Medical...Ch. 12.A - Prob. 6ECh. 12 - What is the difference between capital budgeting...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - Prob. 4Q
Ch. 12 - Why are discounted cash flow methods of making...Ch. 12 - Prob. 6QCh. 12 - Identify two simplifying assumptions associated...Ch. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - Prob. 10QCh. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - How is the project profitability index computed,...Ch. 12 - Prob. 14QCh. 12 - Prob. 15QCh. 12 - Prob. 1AECh. 12 - The Excel worksheet form that appears below is to...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 3F15Ch. 12 - Prob. 4F15Ch. 12 - Prob. 5F15Ch. 12 - Prob. 6F15Ch. 12 - Prob. 7F15Ch. 12 - Prob. 8F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 11F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 13F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Payback Method The management of Unter...Ch. 12 - Net Present Value Analysis The management of...Ch. 12 - Internal Rate of Return Wendell’s Donut Shoppe is...Ch. 12 - Uncertain Future Cash Flows Lukow Products is...Ch. 12 - Prob. 5ECh. 12 - Simple Rate of Return Method The management of...Ch. 12 - Prob. 7ECh. 12 - Payback Period and Simple Rate of Return Nicks...Ch. 12 - Prob. 9ECh. 12 - Prob. 10ECh. 12 - Preference Ranking of Investment Projects Oxford...Ch. 12 - Prob. 12ECh. 12 - Payback Period and Simple Rate of Return...Ch. 12 - Comparison of Projects Using Net Present Value...Ch. 12 - Internal Rate of Return and Net Present Value...Ch. 12 - Net Present Value Analysis Windhoek Mines, Ltd.,...Ch. 12 - Net Present Value Analysis; Internal Rate of...Ch. 12 - Net Present Value Analysis Oakmont Company has an...Ch. 12 - Simple Rate of Return; Payback Period Paul Swanson...Ch. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Comprehensive Problem - Lou Barlow, a divisional...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Net Present Value Analysis In five years, Kent...Ch. 12 - Prob. 28PCh. 12 - Prob. 29P
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