INTRO MGRL ACCT LL W CONNECT
8th Edition
ISBN: 9781266376771
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 $3,600 per month.
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.
An investment of an additional $5,000 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 $1.51 for a wash and $.81 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…
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…
Assignment Scenario:Jerry wants to buy an assisted Living Facility in his home town. Currently, the facility makes a profit each year of $10,000. However, the current director mentioned that if Jerry and his company wanted to perform a remodeling on the facility, that he could increase the room rates and make a profit of $40,000 annually. The facility is currently listed for sale for $650,000. However, a local real estate agent for long-term care facilities explained to Jerry that the likelihood of keeping at full capacity after raising the room rates is 70%.
Round your answers to the nearest 10th of a decimal ( 14.42659 = 14.4)1. Calculate the Return on Investment (ROI) if the remodel is not done within the first year, we will call this, scenario 1.2. Calculate the ROI for the second scenario, if we are able to remodel and charge more for rooms.3. Calculate the Expected Value of both scenarios. REMEMBER, the likelihood is 70% and the chance it will not happen is 30%.
Chapter 12 Solutions
INTRO MGRL ACCT LL W CONNECT
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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