Question
Project 1 Calculations must be done in Excel As the financial advisor to Upmarket Car Rentals you are evaluating the following types of cars to
Project 1 Calculations must be done in Excel
As the financial advisor to Upmarket Car Rentals you are evaluating the following types of cars to add to the fleet: -
Speedster: - A sporty convertible with a cost of $120,000 and a useful life of 4 years. It will produce rental income of $80,000 per year and operating costs of $15,000 per year. A major service is required after 2 years costing $20,000. A salvage value of $30,000 is expected after 4 years. The required return is 8%.
Cruncher: - A rugged off-road vehicle costing $180,000 but with an expected useful life of only 2 years, due to the harsh conditions. It will produce rental income of $150,000 per year and operating costs of $20,000 per year. A major service is required after 1 years costing $30,000. A salvage value of $45,000 is expected after 2 years. The required rate of return is 10%.
Income tax can be ignored.
Required
(1)The NPV's of the two cars.
(2)An analysis of the two cars assuming they are mutually exclusive and can be repeated indefinitely.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started