2. A man is considering investing P500, 000 to open a semi-automatic auto-washing business in a city of 400, 000 population. The equipment can wash, on the average, 12 cars per hour, using two men to operate it and to do small amount of hand work. The man plans to hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 days per week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects to charge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 per month. He would pay his employees for 2 weeks for vacations each year. Because of the length of his lease, he must write off his investment within 5 years. His capital now is earning 15%, and he is employed at a steady job that pays P25, 000 per month. He desires a rate of return of at least 20% on his investment. Would you recommend the investment? a) Use ROR method b) Use present worth method c) Use future worth method d) Solve for the payback period and the IRR
2. A man is considering investing P500, 000 to open a semi-automatic auto-washing
business in a city of 400, 000 population. The equipment can wash, on the average, 12 cars
per hour, using two men to operate it and to do small amount of hand work. The man plans
to hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 days
per week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects to
charge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 per
month.
He would pay his employees for 2 weeks for vacations each year. Because of the length of
his lease, he must write off his investment within 5 years. His capital now is earning 15%,
and he is employed at a steady job that pays P25, 000 per month. He desires a
return
a) Use ROR method
b) Use present worth method
c) Use future worth method
d) Solve for the payback period and the
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