1) Ahmed has decided to buy a TAXI Car for MVR 300,000. This car is expected to be used for 4 years without major maintenance. If Ahmed decides to carry out taxi services by him, the expected earning is MVR 1500 per day (after deducting cost).

Ahmed has to pay MVR 60,000 as a down payment to the bank to buy this TAXI Car.

The bank is willing to finance this project at the interest rate per annum of 12% if the down payment is MVR 60,000.

The repayment period is 5 years. Interest will only be charged for the amount owed to the bank.

REQUIRED

A. Calculate the monthly payment which Ahmed has to pay to the bank.

B. Calculate the payback period.

If he decides to rent the ABC company for 4 years, he will manage to get MVR 1000 per month.

If he agrees to rent the TAXI to ABC company, they are willing to pay MVR 100,000 upfront as a down payment to the bank. The bank is willing to finance this project at the interest rate per annum of 8% if the down payment is MVR 100,000. The repayment period is 5 years. Interest will only be charged for the amount owed to the bank.

REQUIRED

a) Calculate the monthly payment which Ahmed has to pay to the bank if he accepts the ABC Company offer.

b) Calculate the payback period.

c) The price of one ride is MVR 25 and the expected fuel cost of a ride is MVR 5. The fixed cost is the monthly loan re-payment. Calculate the breakeven sales if he decides not to accept ABC Company's offer.