Project 1 Calculations must be done in Excel As the financial advisor to Glamour Car Rentals you
Question:
Project 1 Calculations must be done in Excel
As the financial advisor to Glamour Car Rentals you are evaluating the following types of cars to add to the fleet: -
Coolster: - A sports car with a cost of $150,000 and a useful life of 3 years. It will produce rental income of $110,000 per year and operating costs of $20,000 per year. A major service is required after 2 years costing $15,000. A salvage value of $40,000 is expected after 3 years. The required return is 10%.
Muncher: - A four-wheel drive vehicle costing $250,000 but with an expected useful life of 5 years. It will produce rental income of $140,000 per year and operating costs of $30,000 per year. A major service is required after 3 years costing $20,000. A salvage value of $50,000 is expected after 5 years. The required rate of return is 13%.
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.