The initial cost of 6 school buses is $600,000. the life of each bus is estimated to be 5 years. The annual revenues and cost for the next 5 years are:
Year 1-Revenue = 330,000; Driver costs = 33,000; Repairs and maintenance = 8,000; other costs = 130,000 and annual depreciation = 120,000
Year 2-Revenue = 330,000; Driver costs = 35,000; Repairs and maintenance = 13,000; other costs = 135,000 and annual depreciation = 120,000
Year 3-Revenue = 350,000; Driver costs = 36,000; Repairs and maintenance = 15,000; other costs = 140,000 and annual depreciation = 120,000
Year 4-Revenue = 380,000; Driver costs = 38,000; Repairs and maintenance = 16,000; other costs = 136,000 and annual depreciation = 120,000
Year 5-Revenue = 400,000; Driver costs = 40,000; Repairs and maintenance = 18,000; other costs = 142,000 and annual depreciation = 120,000
A weighted average cost of capital of 10.5% is used. What is the estimated net cash flows for each year? What steps are used to calculate the first year's net cash flow?
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