Reference no: EM13787986
There are two parts to the problem.
An older gentlemen let’s call him Horatio decided he was getting too old to work in the local car wash. He had been working at this one for twenty years. He knew a lot about car wash operations.
He heard of one for sale a few towns away... The owner was asking for $1,350,000 but had told friends and other people that he was anxious to sell, maybe desperate. Horatio heard this too.
He had saved $100,000 over the years and his banker, who knew him well, told Horatio that the bank would loan him as much as he needed. Horatio had saved his money in the bank’s money market funds which paid 9% but Horatio wanted to earn 12%.
Horatio learned that a car wash sold for $8.00, that the car wash was open for only three seasons during the year 270 days and that it averaged 250 cars a day. It use to wash close to 300 per day. Repairs and maintenance cost about $75,000 per year. The owner had fired all the employees. He thought they were all lazy. The owner didn’t realize that he could not open the car was at 8:00 AM and close it twelve hours later seven days a week. He started losing customers because the customers couldn’t depend on the car wash being open for them.
Horatio wanted a salary of $150,000 per year. He planned on restoring the profitability of the car wash so that he could pay off any bank loan in five years, sell the car wash and retire.
He planned to rehire the former employees as well as advertising the new owner change. He planned to increase the $8.00 price for a car wash.
Disregard depreciation and taxes. Use $70,000.00 for interest expense.
Part One considering that the owner wanted $1,350,000, should Horatio agree with this price? If not, what should Horatio do?
Part Two Consider the balanced score card approach to making money. What steps, if any, should Horatio take to improve the profitability of the car wash? Please be specific.
Using sensitivity analysis
: Dependable Drivers Driving School charges $250 per student to prepare and administer written and driving tests. Variable costs of $100 per student include trainers' wagesm study materials, and gasoline. Annual fixed costs of $75,000 include the train..
|
Declared dividends during the current year
: The current year’s cash dividend on the 6 percent, $100 par value preferred stock. 100,000 shares were outstanding at the time of the declaration. A cash dividend of $0.75 per share on the $10 par value common stock. 750,000 shares were outstanding a..
|
The divisions return on investment
: ABC Products is a division of a major corporation. Last year the division had total sales of $21,300,000, net operating income of $575,100, and average operating assets of $5,000,000. The company's minimum required rate of return is 12%. The division..
|
What is the weighted-average unit contribution margin
: Markowis Corporation sells three different models of mosquito zapper. Model A12 sells for $59 and has variable costs of $43. Model B22 sells for $103 and has variable costs of $75. Model C124 sells for $402 and has variable costs of $311. The sales m..
|
Consider the balanced score card approach to making money
: An older gentlemen let’s call him Horatio decided he was getting too old to work in the local car wash. He had been working at this one for twenty years. He knew a lot about car wash operations. Consider the balanced score card approach to making mon..
|
Contribute to the decline in usefulness of operating assets
: What factors may contribute to the decline in usefulness of operating assets? Should the choice of depreciation method be related to these factors? Must a company choose just one method of depreciation for all assets? Explain
|
Interested in seeing how the money grow
: Gen is interested in seeing how the money grows. Her mom suggests that she takes the money in her piggy bank and deposits it in a local bank paying 8.5% compounded quarterly. IF she finds $700 in the piggy bank, how much will it grow to in 10 years?
|
Net credit sales-cost of goods sold-accounts receivable
: Compute the number of days' sales in receivables for 2X10 and 2X09 for each company assuming 365 days in a year. Analyze each company in accordance with a 45-day credit policy.
|
Effective interest method of discount-premium amortization
: Wentz Catering acquired a $300,000 15-year, 10% callable bond on January 1, 20X9, for cash of $258,702. The bond was acquired at a price to yield 12%. The bond pays interest every June 30 and December 31. On December 31, 20X9, after interest had been..
|