Lon 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. Lon, 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. Lon has gathered the following investment information. 1. Five used vans would cost a total of $75,900 to purchase and would have a 3-year useful life 2. Ten drivers would have to be employed at a total payroll expense of $48,010. 3. Other annual out-of-pocket expenses associated with running the commuter service would i 4. Lon has visited several financial institutions to discuss funding. The best interest rate he has 5. Lon expects each van to make ten round trips weekly and carry an average of six students ead Click here to view PV table. Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to O decimal places, eg. 125.) Net income 41450 Net annual cash flows 66750 Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, eg. 10.50.) Cash payback period 1.13 years Annual rate of return 54.61 % Compute the net present value of the commuter service. (Round answer to O 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 6255.2832 Lon 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. Lon, 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. Lon has gathered the following investment information. 1. Five used vans would cost a total of $75,900 to purchase and would have a 3-year useful life 2. Ten drivers would have to be employed at a total payroll expense of $48,010. 3. Other annual out-of-pocket expenses associated with running the commuter service would i 4. Lon has visited several financial institutions to discuss funding. The best interest rate he has 5. Lon expects each van to make ten round trips weekly and carry an average of six students ead Click here to view PV table. Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to O decimal places, eg. 125.) Net income 41450 Net annual cash flows 66750 Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, eg. 10.50.) Cash payback period 1.13 years Annual rate of return 54.61 % Compute the net present value of the commuter service. (Round answer to O 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 6255.2832
