(Ignore income taxes in this problem.) Geo Kaminski is lookingforward to his retirement and is thinking about
purchasing a self serve car wash. He anticipates the purchase ofthe building and land will cost $185,500.
Additionally, he will need $35,000 per year of working capital forthe car wash operating supplies.
Total monthly expenses for the car wash are: water expense will be$3,000, utility expense will be $2,500,
the insurance expense will be $1,800 and the advertising expensewill be $650 each month. Other car washes
generate annual revenue of $138,000; Geo estimates that he cangenerate $138,000 for years one and two
but after year two he will increase the revenue by 25%. Theestimated life for the car wash is 5 years, at the
end of 4 years, Geo will have to replace the roof; estimatedexpense $27,600. Geo is looking for an 11% return
on his investment.
Required:
Would you advise Mr. Geo Kaminski to open the a self serve carwash? Show computations using the net
present value method of investment analysis to support yourconclusion. Round to the nearest whole dollar.
PLEASE SHOW WORK
(Ignore income taxes in this problem.) Geo Kaminski is lookingforward to his retirement and is thinking about
purchasing a self serve car wash. He anticipates the purchase ofthe building and land will cost $185,500.
Additionally, he will need $35,000 per year of working capital forthe car wash operating supplies.
Total monthly expenses for the car wash are: water expense will be$3,000, utility expense will be $2,500,
the insurance expense will be $1,800 and the advertising expensewill be $650 each month. Other car washes
generate annual revenue of $138,000; Geo estimates that he cangenerate $138,000 for years one and two
but after year two he will increase the revenue by 25%. Theestimated life for the car wash is 5 years, at the
end of 4 years, Geo will have to replace the roof; estimatedexpense $27,600. Geo is looking for an 11% return
on his investment.
Required:
Would you advise Mr. Geo Kaminski to open the a self serve carwash? Show computations using the net
present value method of investment analysis to support yourconclusion. Round to the nearest whole dollar.
PLEASE SHOW WORK
