The price of a Daewoo Matiz taxi cab is GH¢20,000. The expected rate of return for such investments is 15% p.a.

a. Estimate the annual cash returns (annuities) to the investor if the economic life of the cab is five years

b. If the investor reinvests the return of capital into an account which pays 10% interest p.a., ascertain how much would be available for replacing the vehicle at the end of the fifth year. NB: Return of capital is obtainable from amortization schedule.

c. Explain the financial feasibility of the decision in b if inflation averages 5% p.a. over the five year period.