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Steven Garcia is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the
Steven Garcia is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the unlversity are from the metropolitan area and visit their homes regularly on the weekends. Steven, an entrepreneur at heart, realizes that few good commuting alternatives are avallable for students doing weekend trivel, He believes that a weekend commuting service could be organized and run proftably from several suburban and downtown shopping mall locations. Steven has gathered the following irwestment information. 1. Five used vans would cost a total of $73,455 to purchase and would have a 3 -year useful life with negligible salvage value. Steven plans to use straight-line depreciation. 2. Ten drivers would have to be employed at a total payroll expense of $49,000. 3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $15,900. Maintenance $3,600, Repairs $3,800. Insurance $3,900, and Advertising $2,300. 4. Steven 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. Steven 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. Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to 0 decimal places, e.g. 125.) Net income Net annual cash flows \$ eTextbook and Media Attempts: 0 of 2 used (b) The parts of this question must be completed in order. This part wili be avallable when you complete the part above
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