Q10 VA

Jason Allen 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.Jason, 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. Jason has gathered the following investment information. 1. Five used vans would cost a to tal of $73,455 to purchase and would have a 3 -year useful life with negligible salvage value. Jason plans to use straight -line depreciation. 2. Ten drivers would have to be employed at a total payroll expense of $48,400. 3. Other annual out-of-pocket expenses assoclated with running the commuter service would include Gasoline $16,200, Maintenance $3,000, Repairs $4,200, Insurance $4,500, and Advertising $2.200. 4. Jason has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital. 5. Jason expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12 for a round-trip ticket. Clickhere to view Pv table. (a) Youransweriscorrect Determine the arnual (1) net income and (2) net annual cash fows for the commuter service (Round onswers to o decimal places, es. 125] Net incorne Net annualcosh fows Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to 0 decimal ploces. c. 125J Net income Net annual cash flows eTextbook and Media Attempts: 1 of 3 used (b) Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal ploces, es 10.50J Cash paybackperiod years Annual rate of return %