Pembroke-Hawk Limousine is deciding if they should invest in a charter company to run trips to various educational and cultural sites throughout the southeast of the. To make the vehicles more cost-effective and the trips more popular, each of eight new buses will be equipped with a kitchenette and a video screen for movies and sports telecasts. Each bus costs $200,000 and requires customized equipment that costs an additional $100,000 per bus. All the buses and the equipment have a recovery period (MACRS life) of 5 years. An advertising campaign, which will start immediately, costs $750,000 and will be paid for immediately. Other start-up costs total $75,000. The sports trips are scheduled for 3-10 days and will generate revenues of $100 per day per seat. For the eight video buses, total revenues are expected to be $3,168,000 for the first year and $3,484800 for the second year (a 10% increase), and increase at a rate of 10% each year for the life of the project. Operating costs are 35% of total revenues. Personnel expenses, including driver salaries, are $650,000 in year 1 and will increase by 10% in year 2 and each year for the life of the project. The company expects to discontinue operation of its video bus tours after the third year. Each bus will be sold to a university for $65,000 ($55,000 for the bus itself and $10,000 for the equipment). The finance department has determined that the beta of this project is 1.75, while the market return is expected to be 10%. Treasury bills pay a nice safe 2 percent. Hawk Transport can finance the entire project with a bank loan from their local First Guaranty Bank at 9%. Should the company proceed with this project? Demonstrate your decision by answering the following questions (build a cash flow estimate, and in it show): o What are the cash flows for the initial investment period (CF0)? o What is the MACRS depreciation schedule for the of the projecr for all of the buses and the equipment? Include this in your Income Statement (*and Cash Flow) They fall into the MACRS 5 year class. See below o What are the after-tax cash flows for the years that the bus tours will be in operation if their tax rate is 24%? o What are the termination cash flows in the final year? o If NPV analysis is used, should the buses be purchased? Expert Answerinformation icon Anonymous's Avatar Anonymous answered thisWas this answer helpful? Thumbs up inactive0Thumbs down active1 70 answers The company expects to discontinue operation of its video bus tours after the third year. Each bus will be sold to a university for $65,000 ($55,000 for the bus itself and $10,000 for the equipment). The finance department has determined that the beta of this project is 1.75, while the market return is expected to be 10%. Treasury bills pay a nice safe 2 percent. Hawk Transport can finance the entire project with a bank loan from their local First Guaranty Bank at 9%. Hide comments Comments You commented You only put part of the information originally posted. What are the answers to the questions? Anonymous's Avatar Leave a comment Leave a comment Post comment Up next for you in Finance AB Builders, Inc., has 20-year bonds outstanding with a par value of $2,000 and a quoted price of 104.347. The bonds pay interest semiannually and have a yield to maturity of 6.68 percent. What is the coupon rate? See answer You are given the following information concerning Parrothead Enterprises: Debt: 13,000 6.2 percent c Solution Image See answer See more questions for subjects you study Questions viewed by other students Q: In July, 2017, Longview Ltd purchased 1,000 air conditioners from it supplier. The normal selling price from its supplier is $1,000 each. Due to the large quantity of its order, Longview Ltd is able to get 10% discount, equivalent to $100,000 off. Longview sold 500 units in the fiscal year of 2018 and the remaining units in the fiscal year of 2019. Longview Ltd booked the $100,00...