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Can you solve the question step by step? *5. Rio Rio runs a chain of car exhaust and tyre fitting centres and he is currently
Can you solve the question step by step?
*5. Rio Rio runs a chain of car exhaust and tyre fitting centres and he is currently considering a new project. He would like to start up a fleet of vans to offer a mobile fitting service offering tyre fitting to customers at home or at work. He has estimated the likely costs involved with the venture will be as follows: (i) Six vans would be purchased at a total cost of $30,000 each and equipping each van would cost a further $10,000. The vans would have a useful life of five years. (Depreciation on the vans has been estimated at $48,000 per annum.) (ii) Initial advertising costs would amount to $5,000. (iii) Initial website development costs would amount to $6,000. (iv) Net cash flows are estimated to amount to $50,000 in the first year, rising to $90,000 in years two to five. (v) Assume all cash flows arise at the end of the year to which they relate. a) Calculate the payback period for this project. b) Calculate the NPV of the project using discount rates of 10%, 15%, and 20%. c) Estimate the IRR of the project. d) If Rio will require a return of more than 15% from the project, should he consider proceeding with it
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