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Essay / Research Paper Abstract
A 10 page paper discussing expansion decisions for an auto body repair shop. The paper provides capital budgeting analysis for a term of ten years, at discount rates of 14%, 20% and 25%; payback; and discounted payback. Payback for the project occurs in year 4, but discounted payback does not occur within the period. Bibliography lists 12 sources.
Page Count:
10 pages (~225 words per page)
File: CC6_KSacctCarriageNPV.rtf
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Unformatted sample text from the term paper:
an automotive body shop currently operating with seven stalls in a leased building. The owner, Chris Craft, seeks to determine if pursuing expansion at a different location would be
profitable for the business. She intends to retire after ten years and will sell the business at the end of that term. For the present, she needs to
determine whether the expansion can be profitable. These determinations cannot be made without assessing costs in terms of present and future dollars.
It is necessary to assess the proposed project in terms of total net present value in order to predict profitability and compare the implications of financing decisions. Construction of the
New Facility Ms. Craft needs to consider all of these factors: * Initial cash outlay; * Potential annual return; * Disposal values; and
* Net present value of the total project. Initial Cash Outlay The new facility will consist of 1,400 ft2, at a construction cost
of $1,022,000. Land cost is high at $340,000 per acre, but Carriage Motors will need to ensure that there is ample space for parking for a variety of purposes:
work waiting for the body shop personnel, customer traffic (there will be two cars for each customer at various times), employee parking and insurance adjuster parking. Since Ms.
Craft wants to provide office space for insurance adjusters, she also will need to provide parking space for them that does not claim all available customer parking areas. The
minimum amount of land that the new facility can occupy and still provide sufficient room for operation is assumed to be 2.5 acres, yielding a land purchase cost of $850,000.
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