A man is considering investing Php 750,000 to open a semi-automatic auto washing business in the city of 450,000 population. The equipment can wash on average, 12 cars per hour using 2 men to operate it and to do some small amount of hand work. The man plans to hire two additional men in addition to himself and operate the station on an 8-hour basis, 6 days a week and 50 weeks per year. He will pay his employee Php 15 per hour. He expects to charge Php 30 for a car wash. Out of pocket miscellaneous cost would be Php 9,750 per month. He would pay his employees for 2 weeks 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 20,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
A man is considering investing Php 750,000 to open a semi-automatic auto washing business in the city of 450,000 population. The equipment can wash on average, 12 cars per hour using 2 men to operate it and to do some small amount of hand work. The man plans to hire two additional men in addition to himself and operate the station on an 8-hour basis, 6 days a week and 50 weeks per year. He will pay his employee Php 15 per hour. He expects to charge Php 30 for a car wash. Out of pocket miscellaneous cost would be Php 9,750 per month. He would pay his employees for 2 weeks 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 20,000 a month. He desires a rate of return of at least 20% on his investment. Would you recommend the investment?
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Break-even Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education