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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 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 working capital needs for cleaning supplies, change funds, and so forth. After five years, this working capital would be released for investment elsewhere. 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. Click here to view Exhibit 13B-1 and Exhibit |13B-2, to determine the appropriate discount factor(s) using tables Required: 1. Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation 2 a Determine the net present value using the net present value method of investment analysis 2-b. Would you advise Mr. Duncan to open the car wash? EXHIBIT 138-1 Present Value of $1 12345 67890 Periods4% 5% 6% 7* 8% 9% 10% 11% 12% 139 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 259 1 0962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0813 0.806 0.800 2 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0,672 0.661 0.650 0.640 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0,641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 4 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0,572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0.423 0.410 5 0.822 0.784 0.747 0.713 0.681 0.650 0621 0.593 0.567 0543 0.519 0.497 0.476 0.456 0.437 0.419 0,402 0,386 0.370 0355 0.341 0.328 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0,390 0.370 0.352 0.335 0.319 0,303 0.289 0.275 0.262 0.760 0711 0.665 0.623 0.583 0.547 0.513 0.482 0,452 0.425 0.400 0.376 0354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0218 0.204 0.191 0.179 0.168 0.703 0,645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0,308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 10 0676 0,614 0.558 0.508 0463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0,137 0.126 0.116 0.107 11 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 12 0,625 0.557 0,497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 12 0.601 0.530 0.469 0.415 0.368 0.326 0 290 0.258 0.229 0.204 0.192 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 14 0.577 0.505 0.442 0.388 0.340 0.299 0 263 0232 0.205 0.181 0.160 0141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0055 0.049 0.044 15 0.555 0,481 0.417 0.362 0.315 0.275 0.239 0 209 0.183 0,160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 16 0.534 0.458 0.394 0.330 0.202 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.001 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 17 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0,052 0.045 0.039 0.034 0.030 0.026 0,023 18 0.494 0.416 0.250 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0,081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0,021 0018 19 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0051 0.043 0.037 0.031 0,027 0.023 0.020 0.017 0.014 20 0.456 0377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0016 0.014 0.012 21 0.439 0.359 0.294 0,242 0.199 0.164 0135 0.112 0.093 0.077 0.064 0.053 0.014 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 22 0.422 0.342 0.278 0.226 0.184 0.150 0.123 0.101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0022 0.018 0,015 0,013 0.011 0.000 0.007 23 0.406 0.326 0.262 0.211 0.170 0,138 0.112 0.091 0.074 0.060 0.049 0,040 0.033 0.027 0.022 0.018 0,015 0,012 0.010 0.009 0.007 0.006 24 0.390 0.310 0.247 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0,015 0,013 0.010 0.008 0.007 0.006 0.005 25 0.375 0.295 0.233 0.184 0.146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0,016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 26 0.361 0.281 0.220 0.172 0.135 0.106 0084 0.066 0.053 0.042 0.033 0.026 0.021 0.012 0.014 0.011 0.000 0.007 0.006 0.005 0.004 0.003 27 0.347 0.268 0.207 0.161 0.125 0.098 0.076 0.060 0,047 0.037 0.029 0.023 0,018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002 28 0.333 0.255 0.196 0.150 0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0012 0.010 0.008 0.006 0.005 0,004 0.003 0.002 0.002 29 0.321 0.243 0.185 0.141 0.107 0.08 0.063 0048 0.037 0.029 0022 0.017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 30 0.308 0.231 0.174 0.131 0.000 0.075 0.057 0.044 0.033 0.026 0.020 0,015 0,012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 40 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 EX HigiT 13-2 Present Value of an Annuity of 51 in Area - 1" alm 491 4339 Periods 5% 794 99 10% 11% 12% 13% 14% 15% 16%. 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 090 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 1.886 1.859 1.833 1808 1.783 1759 1736 1.713 1,690 1.668 1647 1626 1.605 1585 1.566 1.547 1.528 1509 1.492 1.474 1457 1 440 3 2.775 2773 2673 2.624 2.577 2.531 2.487 2444 2.402 2,361 2.322 2,283 2246 2210 2174 2.140 2.106 2.074 2.042 2.011 1.981 1952 4 3.630 3.546 3.465 3.387 3312 3.240 3.170 3.102 3.037 2974 2.914 2,855 2.798 2 743 2690 2.639 2589 2.540 2,494 2.448 2.404 2.362 5 4.452 4329 4212 4.100 3993 3.890 3791 3.696 3605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2991 2926 2 864 2.803 2745 2689 5.242 5.076 4917 4.767 4.623 4486 4.355 4221 4.111 3.998 3.889 3.784 3,685 3,589 3.498 2.410 3 326 3.245 3.167 3.092 3.020 2.951 7 6002 5786 5582 5 389 5206 5033 4.868 4712 4564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3327 3242 3,161 6733 6.463 6.210 5.971 5747 5535 5.335 5.146 4 968 4.799 4.639 4 487 4 344 4.207 4078 2.954 3.837 3.726 3.619 3.518 3.421 3.329 9 7.435 7.108 6.802 6.515 6.247 5 995 5.759 5.537 5.328 5.132 4.946 4.772 4,607 4.451 4.303 4.163 4.031 3.905 3.786 3.573 3566 3.463 10 8.111 7.722 7.360 7.024 6710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 11 8.760 8.306 7.887 7.499 7.139 6 805 6.495 6 207 5938 5.687 5.453 5.234 5,029 4836 4656 4.486 4327 4.177 4.035 3.902 3.776 3.656 12 9.385 8.863 8.384 7943 7.536 7.161 6.814 6.492 6.194 5.918 5660 5.421 5.197 4988 4793 4.611 4.439 4.278 4.127 3.985 3851 3.725 13 9.986 9.394 8.853 8.358 7904 7.487 7.103 6.750 6.424 6.122 5.842 5583 5.342 5.118 4.910 4715 4533 4.362 4.203 4.053 3912 3.780 14 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6:628 6.302 6.002 5.724 5.468 5.229 5008 4802 4,611 4 432 4265 4.108 3962 3.824 15 11.118 10,380 9.712 9.108 8559 8061 7.606 7.191 6.811 6.462 6.142 5.847 5.575 5,324 5,092 4,876 4,675 4.489 4.315 4.153 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 17 12.166 11 274 10.477 9.763 9.122 8.544 8.022 7549 7.120 6729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4219 4.059 3910 18 12.659 11.690 10.828 10.0599,372 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5,534 5.273-5.033 4.812 4.608 4.419 4243 4.080 3.928 19 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4263 4.097 3.942 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7963 7.469 7.025 6.623 6.259 5.929 5.628 5353 5.101 4870 4,657 4.460 4279 4.110 3.954 21 14,029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7562 7.102 6.687 6.312 5,973 5.665 5 384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 22 14.451 13.163 12.042 11.061 10 201 9.442 8.772 8.176 7645 7.170 6.743 6.359 6,011 5696 5410 5.149 4.909 4.690 4.488 4.302 4.130 3970 23 14.857 13.489 12.303 11.272 10.371 9.580 8,883 8.266 7718 7.230 6.792 6.399 6,044 5723 5.432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 24 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6.434 6073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 25 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4 147 3.985 26 15.983 14.375 13.003 11826 10.810 9.929 9.161 8.488 7.896 7.372 6.906 6.491 6.118 5,783 5.480 5 206 4,956 4.728 4.520 4.328 4.151 3.988 27 16.330 14 643 13.211 11.987 10 935 10.027 9.237 8.548 7943 7 409 6.935 6.514 6.136 5.798 5.492 5215 4.964 4734 4.524 4.332 4.154 3.990 28 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7.984 7.441 6961 6,534 6.152 5.810 5.502 5223 4.970 4.739 4.528 4.335 4.157 3 992 29 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 3.022 7.470 6.983 6.551 6.166 5.820 5510 5229 4.975 4.743 4.531 4337 4.159 3.994 30 17.292 15 372 13.765 12 409 11.258 10.274 9.427 8.694 8.055 7.496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4.534 4.339 4.160 3.995 19.793 17.159 15.046 13 332 11.925 10.757 9.779 8951 B 244 7.634 7.105 6,642 6 233 5.871 5.548 5.258 4.997 4 760 4544 4.347 4.166 3.999

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