The Iowa City transit is considering investing into another bus to serve a new route. The...

The Iowa City transit is considering investing into another bus to serve a new route. The bus will cost $60,000 (initial investment in Yr 0). Revenues are expected to be $150,000 in the first year, and then grow by 5% each year. Costs are expected to be 80% of sales. Iowa City transit plans to operate the bus for 3 years. The project will require an immediate (Yr 0) investment of $3000 in working capital with an additional investment of $500 in year one. All working capital will be returned in year 3. Assume 3-year straight-line depreciation (no salvage value), and a tax rate of 30%. What is the NPV of the project assuming a discount rate of 15%?

Solutions

Expert Solution

Net Present Value = $ (10,976.49)

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

The City Transit Authority plans to hire 14 new bus drivers. From a group of 100...

The City Transit Authority plans to hire 14 new bus drivers. From a group of 100 qualified applicants, of whom 60 are men and 40 are women, 14 names are to be selected by lot. Suppose that Mary and John Lewis are among the 100 qualified applicants. (a) What is the probability that Mary's name will be selected? What is the probability that both Mary's and John's names will be selected? (Round your answer to four decimal places.) (b) If...

1. A city bus service claims that the time to complete the route from the zoo...

1. A city bus service claims that the time to complete the route from the zoo to City Hall never varies by more than 2.0 minutes. The times for 18 randomly chosen trips from the zoo to City Hall were recorded and gave a sample mean of 26.6 minutes with a sample standard deviation of 2.25 minutes. Find and interpret a 98% confidence interval for the population standard deviation of travel times. (State any assumptions that you need to make.)

The transit authority wants to increase its bus services. The transit authority would purchase 300 new...

The transit authority wants to increase its bus services. The transit authority would purchase 300 new energy-efficient buses. They would replace the 150 buses now in operation, doubling the size of the transit system. At a unit cost of $800,000 for each bus, the total expenditure would be $240 million. The projected salvage value of the old buses is $20,000 per bus, leaving $237 million to be financed by the transit authority. . The transit authority would purchase the buses,...

The City of Boston is considering adding new buses for its current mass-transit system that links...

The City of Boston is considering adding new buses for its current mass-transit system that links from the Hartsfield International Airport to major city destinations on a nonstop basis. The total investment package is worth $6 million and expected to last 9 years with a $840,000 salvage value. The annual operating and maintenance costs for buses would be $1 million during the first year, and will grow by 7% each year over the previous year thereafter. If the system is...

Your campus bus transit corporation is considering switching its fleet from gasoline to hybrid. From the...

Your campus bus transit corporation is considering switching its fleet from gasoline to hybrid. From the systems perspective, what advice would you give?

The City of G is considering building a light rail transit (LRT) system similar to the...

The City of G is considering building a light rail transit (LRT) system similar to the one recently constructed in City KW. You have been asked to conduct a cost benefit analysis of the project. You have some data about the KW LRT project: Present value of annual net benefits (to KW residents) =$620 million Construction costs (paid by KW residents) (t=0) =$820 million Grant from the provincial government (t=0) =$300 million Grant from the federal government (t=0) =$250 million...

A new bus route has been established between downtown Denver and Englewood (a suburb of Denver)....

A new bus route has been established between downtown Denver and Englewood (a suburb of Denver). Dan has taken the bus to work for many years. For the old bus route, he knows from long experience that the mean waiting time between buses at this stop was u=20 minutes. However, a random sample of five waiting times between buses using the mean route had mean x = 15.1 minutes with sample standard deviation s = 6.2 minutes. Does this indicate...

Cherry Creek Inc. is considering expanding to another city; the project will cost $50,000 and is...

Cherry Creek Inc. is considering expanding to another city; the project will cost $50,000 and is expected to generate after-tax cash flows of $10,000 per year in perpetuity. The firm has a target debt/equity ratio of 0.5 and the new equity has a flotation cost of 10% and a required return of 15%, while new debt has a flotation cost of 5% and a required return of 10%. The tax rate is 34%. Calculate the cost of capital. Calculate the...

Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve...

Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama–Georgia border. There are three cities being considered. After site visits and a budget analysis, the expected income and costs associated with locating in each of the cities have been determined. The life of the warehouse is expected to be 12 years and MARR is 15%/year. City Initial Cost Net Annual Income Lagrange $1,260,000 $480,000 Auburn $1,000,000 $410,000...

Your corporation is considering investing in a new product line. The annual revenues for the new...

Your corporation is considering investing in a new product line. The annual revenues for the new product line are expected to be $306000 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $59900. The old equipment currently has no market value. The new equipment cost $55400. The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At...

Subjects