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Kenneth Clark is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the
Kenneth Clark 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. Kenneth, 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. Kenneth has gathered the following investment Information. 1 2 a 3 3. Five used vans would cost a total of $75.261 to purchase and would have a 3 year useful life with nogligible salvage value Kenneth plans to use straight-line depreciation. Ten drivers would have to be employed at a total payroll expense of 548,900, Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,100. Maintenance $3.500, Repairs $3,800, Insurance $4.500, and Advertising $2,800. Kenneth has visited several financiat Institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital Kenneth expects each van to make 10 round trips weekdy and carry an average of students each trip. The services expected to operate 30 weeks each year and each student will be charged $12 for a round-trip ticket 5. Kenneth Clark 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. Kenneth, 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. Kenneth has gathered the following investment Information. 1 2 a 3 3. Five used vans would cost a total of $75.261 to purchase and would have a 3 year useful life with nogligible salvage value Kenneth plans to use straight-line depreciation. Ten drivers would have to be employed at a total payroll expense of 548,900, Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,100. Maintenance $3.500, Repairs $3,800, Insurance $4.500, and Advertising $2,800. Kenneth has visited several financiat Institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital Kenneth expects each van to make 10 round trips weekdy and carry an average of students each trip. The services expected to operate 30 weeks each year and each student will be charged $12 for a round-trip ticket 5
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