New Plumber Input Data Your brother has a store that sells propane fueled fire place settings, propane space heaters, and propane water heaters. You propose that you start a partner servicing business that would hire a licensed plumber to install the and maintain the products he sells. That is, instead of going to an outside plumber, customers would use the new firm to install new equipment or when they have a maintenance problem. You guess that the operation would generate $115,000 in revenues each year. Such servicing would require the purchase of a van at a cost of $70,000. In addition to the purchase price of the van, $5,000 will have to be spent painting it and installing shelves and other equipment. Because the van would have to carry inventories of spare parts, an initial purchase of parts would be required. In addition, customers will be billed on a 2/10 net 30 basis so that the firm's accounts receivables will grow by 46 days worth of the servicing business's revenues. You have checked Dunn and Bradstreet data on businesses that perform service only and have learned that on average inventory levels are 31 days of operating expenses and payables are 23 days of operating expenses. The van is expected to last five years at which time it will be sold for $6,000. Vans of this kind have an MACRS class life of five years. Operating costs will consist of wages (for the driver/plumber), gas, use of spare parts, and scheduled maintenance for a total of $92,000 per year. Evaluate this proposal using the capital budgeting criteria, NPV, IRR, MIRR, PI, Payback and Discounted Payback. The weighted cost of capital for this firm is 12% and the marginal tax rate is 40%.