Sales	$300,000	$330,000	$350,000	$380,000	$400,000
Drivers Cost	33,000	35,000	36,000	38,000	40,000
Maintenance	8,000	13,000	15,000	16,000	18,000
Fuel Cost	105,000	115,500	122,500	133,000	140,000

Capital Budgeting Case Study Case I: A private school is considering investing in its own transport fleet (School buses). The initial cost of the transport fleet would be 315 000. The life of the transport fleet would be five years, after which time the vehicles would have to be scrapped with no salvage value. The /$ exchange rate on the date of the purchase is expected to be 0.98. The management has come up with the following Revenues and Cost data for the next five years. To raise funds for the project your company is proposing to raise a long-term loan at 11.50% interest rate per annum. You are told that there is an alternative project that could be invested in using the funds which has the following projected results: Payback period = 3 years Accounting rate of return = 30% Net present value = $120 000. As funds are limited, investment can only be made in one project. Note: The transport fleet would be purchased at the beginning of the project and all other expenditure would be incurred at the end of each relevant year. Required: 1. Prepare a table showing the net cash flows over the life of the transport fleet project. 2. Calculate the following for the transport fleet project and analyze: (i) Payback period (ii) Accounting rate of return (iii) Net present value (iv) Internal Rate of Return 3. Write a short memo to the Investment Manager in your company explaining whether the company should invest in the transport fleet project or choose the alternative project available. You must clearly explain the reasons for your decision. 4. What qualitative factors might be considered to back up the investment in the fleet if your advice is to accept? 5. Suggest what the mentioned alternative could be. 6. Suggest a situation when the school is indifferent between the alternatives? 7. What should the purchase price of the fleet be to change your advice?