Delivery service and pays for the fax machine in cash

Assignment Help Financial Management

Reference no: EM132021074

You decide to help I.M. with his analysis. A good fax machine costs $500 and functions properly for 5 years. The phone company charges $300 for installing a new line and $60 a month for the line. A new delivery van costs $20,000 and can be financed for 60 months with a $4,000 down payment. I.M.’s bank will finance the van at 5.5 percent compounded monthly, and you calculated his weighted average cost of capital at 8 percent. You found that a 5-year-old van of this model sells for $5,000. After discussing the business venture with several retired restaurant owners at the local SCORE office, you believe that I.M., after paying his food costs, will increase his breakfast and lunch trade by $2,000 a month. I.M. can hire a part-time driver for $600 a month. The vehicle depreciates straight line for 5 years, or $3,000 per year. I.M. is a sole proprietor and is in a 20-percent tax bracket. You estimate that it will cost I.M. $300 a month to pay for maintenance, upkeep, and insurance on the van.

a. If I.M. decides to establish a delivery service and pays for the fax machine in cash, how much cash does he need now?

b. What is the monthly payment for the delivery van?

c. Using the time value of money and a 5-year life for this project, what is the present value of all of I.M.’s costs?

d. Using the time value of money and a 5-year life for this project, what is the present value of all of I.M.’s benefits?

e. What is the NPV of the delivery service?

f. What is the PI of the delivery service?

g. What is the payback?

h. What recommendation would you give to I.M. with regard to this project?

Reference no: EM132021074

Questions Cloud

Various tests and examinations conducted : Associate with each patient a log of the various tests and examinations conducted.

Identify areas for improvement : How other cloud companies or those that use cloud services and identify areas for improvement such as adding additional cloud services.

Grow from being new venture to adding employees : As organizations grow from being a new venture to adding employees and departments, they often change their organizational structures.

Working on my final case project : Working on my Final Case Project, but I only have until tomorrow, before 11:00 pm to submit it. Due to work and other issues, I have not started on it.

Delivery service and pays for the fax machine in cash : If I.M. decides to establish a delivery service and pays for the fax machine in cash, how much cash does he need now?

Write link-based implementation of a queue : Write link-based implementation of a queue that uses a circular linked chain to represent the items in the queue. will need a single tail pointer.

Remove items from a binary search tree : Design an algorithm to remove items from a binary search tree. This algorithm differs from the one described in the trees lecture when a node N has two children

Find an international news forum online such as inkdrop : What leader behaviors are praised? Are any of GLOBE's global leadership behaviors addressed in these articles?

Continue operating with the current heat exchange : Should your company purchase this heat exchange or continue operating with the current heat exchange, which is expected to have no salvage value in ten years?

User Account

All Pages