I have been dreaming about owning one of those decked out golf carts for quite s
ID: 2766487 • Letter: I
Question
I have been dreaming about owning one of those decked out golf carts for quite some time. I know that my decision will be made easier if I estimate my cash flows so I can understand what they will be. My income (all from that golf ball washer) is $24,000 per year & the cash flow estimates I have pulled together are as follows: Please estimate my:
Initial investment
Operating cash flows
Terminal cash flow (end of year
Price of my decked out golf cart
$70,000
Estimate of what I can get for the cart if I sell it after 4 years
$40,000
Sales tax on my purchase price
6.5%
Trade in value
$0
Monthly maintenance costs (I am too busy to do it myself)
$800
Monthly storage shed rent (I need to keep it out of the weather!)
$500
Price of my decked out golf cart
$70,000
Estimate of what I can get for the cart if I sell it after 4 years
$40,000
Sales tax on my purchase price
6.5%
Trade in value
$0
Monthly maintenance costs (I am too busy to do it myself)
$800
Monthly storage shed rent (I need to keep it out of the weather!)
$500
Explanation / Answer
Initial investment = cost of cart + sales tax
= 70,000 + 70,000 x 6.50%
= 74,550
Operating cash flow = Income – costs
= 24,000 – 800 -500
= 22,700
Terminal value = Salvage value
=40,000
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