Lon Timur is an accounting major at a midwestern state university lo.docx - Lon Timur is an accounting major at a midwestern state university located

Lon Timur is an accounting major at a midwestern state university lo.docx

This preview shows page 1 - 4 out of 4 pages.

Image of page 1
Lon Timur 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. Lon, 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. Lon has gathered the following investment information. (a) 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.) (b) Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.) (c) Compute the net present value of the commuter service. (Round answer to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding
Image of page 2
Image of page 3
Image of page 4

You've reached the end of your free preview.

Want to read all 4 pages?

Unformatted text preview: the number eg -45 or parentheses eg (45).For calculation purposes, use 5 decimal places as displayed in the factor table provided.)1.Five used vans would cost a total of $75,300 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation.2.Ten drivers would have to be employed at a total payroll expense of $47,990.3.Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $15,990, Maintenance $3,310, Repairs $4,000, Insurance $4,200, and Advertising $2,510.4.Lon 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.Lon expects each van to make ten round trips weekly and carry an average of six students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12.05 for a round-trip ticket....
View Full Document

  • Fall '15

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors