Offers low-cost bus transportation

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Reference no: EM131030973

FastBus Inc. offers low-cost bus transportation between Philadelphia and New York City. The company has 2 buses, each bought for $300,000. Each bus can carry 40 passengers per trip and does 7 daily round trips between Philadelphia and New York City. The price of each one-way ticket is $12. The company sells 28 seats on average per one-way trip, so the load factor is 70%. The annual fixed cost of running the company is $3,000,000. The major variable cost in their line of business is gasoline, which costs $25 per one-way trip. Fast Bus Inc. buses operate 365 days a year. Define the return on invested capital as the ratio of the profits (PER YEAR) and the invested capital. You can draw an ROIC tree in the same way that we drew a KPI tree in class. Simply have the ROIC as “the root” of the tree instead of profits. Then answer the question: Q1: What is the current number of customers that are served each year? Assume that FastBus operates 365 days per year and that each customer buys only one one-way ticket per person. Q2: What is the current ROIC? (Please give your answer in decimal form. For example, 0.25 for 25%) Q3; What is the minimum load factor at which the company breaks even? (Please give your answer in decimal form. For example, 0.25 for 25%)

Reference no: EM131030973

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