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Homework answers / question archive / The Spotless Automobile Corporation is contemplating the acquisition of an automatic car wash
The Spotless Automobile Corporation is contemplating the acquisition of an automatic car wash. The following information is relevant:
The cost of the car wash is $160,000
The anticipated revenue from the car wash is $100,000 per annum.
The useful life of the car wash is 10 years.
Annual operating costs are expected to be:
|
Salaries |
$30,000 |
|
Utilities |
9,600 |
|
Water usage |
4,400 |
|
Supplies |
6,000 |
|
Repairs/maintenance The firm uses straight-line depreciation. The salvage value for the car wash is zero. The company's cutoff points are as follows: |
10,000 |
|
Payback |
3 years |
|
Accounting rate of return |
18 % |
|
Internal rate of return |
18 % |
Ignore income taxes.
Required:
