Part A Latif is an accounting major at a Cyberjaya university located approximately 40 kilometers from Kuala Lumpur. Many of the students attending the university are from the metropolitan area and visit their homes regularly over the weekends. Latif, 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. Latif has gathered the following investment information. Five used vans would cost a total of RM75,000 to purchase and would have a 3-year useful life with negligible residual value. Latif plans to use straight-line depreciation. Ten drivers would have to be employed at a total annual payroll expense of RM48.000. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline RM16,000. Maintenance RM3.300, Repairs RM4,000, Insurance RM4,200, and Advertising RM2,500. Latif has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 16%. Use this rate for cost of capital. Latif expects each van to make ten round trips weekly and carry an average of six students cach trip. The service is expected to operate 30 weeks each year, and each student will be charged RM12.00 for a round-trip ticket. (Nete: Disewww rate for 16% can be obtained by referring to the tables de page 9 Required: a) Determine the annual (1) net income, and (2) net annual cash flows for the commuter service. (6 marks) b) Compute (l) the payback period, and (2) the annual rate of return. (4 marks) c) Compute the net present value of the commuter service. (Round to the nearest RM) (3 marks) d) What should Latif conclude from these computations? (4 marks) Continued