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Full Limo Inc. offers high-end transportation services between the King of Prussia Mall (KPM) and Center...

Full Limo Inc. offers high-end transportation services between the King of Prussia Mall (KPM) and Center City Philadelphia (22.5 miles). The invested capital is $800,000, corresponding to the investment in the 4 luxury vans it owns (you can ignore all other invested capital). Each van can carry 10 passengers. Each van makes 12 daily trips from Philadelphia to KPM and 12 from KPM to Philadelphia. The company charges $10 for each one-way ride. The current load factor is 40% (that is, each ride has 4 passengers on average). A significant source of operating costs is the fuel cost. The company vans have a fuel economy of each of 20 mpg (miles/gallon). Current fuel prices are 2.629 $/gallon. The staff costs and other costs of operating the service and running the business are $1M per year. The company operates 365 days a year.

a) Draw an ROIC (return on invested capital) tree for the company.

b) What is the ROIC?

c) Assume that the company can increase the fuel efficiency of the vans to 25mpg. What would be the new ROIC?

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