chpt 27 qu 2

Current Attempt in Progress Crane Timur is an accounting major at a mbdwesternstate 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. Crane, an entrepreneurat heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting gervice could be organized and run profitably from several suburban and downtown shopping mali locations Crane has gathered the following imvertment information 1. Five used vans would cost a total of $74,538 to purchase and would have a 3 -year useful ite with negligible salvage value Crane plans to usestraight-line depreciation. 2. Ten drivers would have to be employed at a total payroll expense of $48,200 3 Other annual out of-pocket expenses as sociated with running the commuter service would include Gasoline 515,700 , Maintenance $3,000, Repalrs $4,100, lnsurance $4,500, and Advertising $2,200 4. Crane has visited several financial inatitutions to discuss funding. The best interest rate he has been able to negotiate is 15\%. Use this rate for cost of capital. 5. Crane expects each van to malee 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 tichet. Clickhere to view PV table (a) Determine the annual (1) net income and (2) fnet annual cash flows for the commuter service (Round answers to 0 decimal ploces, es. 1253 Net income Net annual cesh fows (b) Compute (1) the cash payback period and (2) the aninual rate of return (Round answers to 2 decimol ploces, es. 20.50) Cash paybeck period years Annual rate of return 3 (c) Compute the net present value of the commuter service (Round answer to 0 decimal places, es 125. if the net present volue is neative. use either a nesotive sign proceding the number eg -45 or parentheses es (45). For colailotion purpenes use 5 decimal plgcer as displayed in the foctor table provided. Net present value 5