Keon has just graduated from college with a business management degree. Through part-time work and trading stocks, he has amassed significant savings which he is considering investing in a small business venture. Historically, Keon has earned a 9% annual return on his investments, but he realizes that he can't expect the same results with full-time employment or entrepreneurship. He hopes to earn 5.50% a year going forward, should he decide to leave $70,000 invested in a relatively safe investment portfolio. As a result of his trading success, Keon has been offered a job as a junior analyst at a major investment management firm. The job would pay $60,000 to start, with a promotion expected in a year. At that point, the salary would increase to $72,000, followed by steady $2,000 increases annually. Keon, who has always been interested in limousines, has heard about a unique opportunity to purchase an existing business from a retiring founder. Meena is seeking $200,000 for her business. She owns four limousines, originally purchased for $80,000 each six years ago.

In addition to the vehicles, Keon would get a list of regular customers from Meena. Keon has some experience with valuing goodwill (a common accounting term) and he believes that 60 customers spending an average of $250 per month should be valued at the net present value of the next three years of cashflows. Keon also believes he can increase the rates of these steady customers by 4% a year (first increase immediately) without losing any of their business. In a brief conversation with Keon, Meena mentioned that she is using the straight-line depreciation method with an estimated life of twenty years and salvage value of $2,000, so $200,000 is really a bargain. Keon is skeptical about this and wants more details on depreciating luxury cars. He wants advice on best depreciation practices and the impact different methods can have. After Keon mentions that he has a mechanic friend, Bill, who would be looking at the cars before any deal was finalized, Meena admits that one of the limos needs a $3,000 repair. She has been considering selling the vehicle as is and upgrading to an oversized luxury limousine. When Keon asked if she had an idea how high the as-is price may be, Meena hesitated and said she wasn't sure. Keon described the issue to Bill and he advised that a $30,000 price was a reasonable in the current market

Keon has searched around for oversized limos and he thinks the best approach would be to buy a used one for $70,000. Keon believes he can generate revenues 33% higher than a regular limo. However, the cleaning, maintenance, and operating costs of the larger limo would be 25% higher than the smaller vehicles are currently incurring. Keon wants a detailed cost-volume-profit analysis on the oversized limo, as he believes there is more opportunity with pricing and business strategy here compared to the regular limos. Keon has asked Meena about pricing and costing of the limo services and has made his own plans, should he acquire the business. In terms of budgeting resources, Keon is planning to use two limos for regular customers and the other two for non-regulars. Here is a detailed breakdown of non-regular customer averages for a single limo (weeknights are Monday through Thursday):

Revenue per weeknight, January through December $190 Revenue per weekend night, January through May 236 Revenue per weekend night, June through August 259 Revenue per weekend night, September through December 241 Operating expense per weeknight 104 Operating expense per weekend night 132 Maintenance expense, quarterly 320 Cleaning expense, weekly 100