Carla Vista Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Carla Vista, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Carla Vista has gathered the following investment information.

1.

Five used vans would cost a total of $74,676 to purchase and would have a 3-year useful life with negligible salvage value. Carla Vista plans to use straight-line depreciation.

2.

Ten drivers would have to be employed at a total payroll expense of $49,000.

3.

Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $15,900, Maintenance $3,300, Repairs $4,100, Insurance $4,100, and Advertising $2,200.

4.

Carla Vista has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital.

5.

Carla Vista expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12 for a round-trip ticket.

B. Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.)

Cash payback period			years
Annual rate of return			%

(c) Compute the net present value of the commuter service. (Round answer to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Net present value