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In eight 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 an eight-year lease at a cost of $1,700 per month. Purchase and installation costs of equipment would total $200,000. In eight years the equipment could be sold for about 10% of its original cost. An investment of an additional $2,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After. eight years, this working capital would be released for investment elsewhere. Both a wash and a vacuum service would be offered with a wash costing $2.00 and the vacuum costing $1.00 per use. 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. In addition to rent, monthly costs of operation would be: cleaning, $450; insurance, $75; and maintenance, $500. 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. Assuming that the car wash will 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 working capital, or the salvage value in these computations.) (Ignore income taxes.) Would you advise Mr. Duncan to open the car wash? Show computations using the net present value method of investment analysis. Round all dollar figures to the nearest whole dollar. (Ignore income taxes.)
The Health corp reported net income for 2015 of $ 177,500. Health began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $ 100 par value 8% preferred shares outstanding. what is the weighted average number of..
Combo Company operates in a country in which distributed profits are taxed at 25 percent and undistributed profits are taxed at 30 percent. In Year 1 Combo generated pre-tax profit of $100,000 and paid $20,000 in dividends from its Year 1 earnings. I..
Should analysts be careful in comparing financial ratios across companies in different countries? Why or why not? Why might individual investors wish to include foreign companies in their investment portfolio?
Compute the companys total production cost per unit if 25,000 units had been produced and why might a manager of a company using absorption costing produce more units than can currently be sold?
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Construct a spreadsheet simulation to simulate 100 customers and collect statistics on the net order amount; - Describe the distribution of the net amounts between $0 and $200.
question suppose you are an accountant at abc loans. your role is to assess loan applications. as part of its
Analyze the following comment: "Cost cutting has become the holy grail of corporate management; but what helps the financial statements up-front, in the short run, can end up hurting the business as a whole, in the long run."
Romanoff Industries had the following inventory transactions occur during 2015: Units Cost/unit 2/1/15 Purchase 54 $45 3/14/15 Purchase 93 $47 5/1/15 Purchase 66 $49 The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a pe..
Journalize the October transactions and the October 31 adjusting entry for accrued interest receivable - Manatee customer balance for finance charges on unpaid balances
During 2014, Sparrow Inc. borrowed $88,000 from a local bank. In addition, Sparrow used $120,000 of cash to construct a new corporate office building. Determine the acquisition cost of the new building. The building has an estimated useful life of 20..
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