What price should matt charge per rental for the business

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Reference no: EM13877391

Life-Cycle Pricing Matt Simpson owns and operates Quality Craft Rentals, which offers canoe rent- als and shuttle service on the Nantahala River. Customers can rent canoes at one station, enter the river there, and exit at one of two designated locations to catch a shuttle that returns them to their vehicles at the station they entered. Following are the costs involved in providing this service each year:


Fixed Costs

Variable Costs

Canoe maintenance

$ 2,300

$2.50

Licenses and permits

3,000

0

Vehicle leases

5,400

0

Station lease

6,920

0

Advertising

6,000

0.50

Operating costs

21,000

0.50

Quality Craft Rentals began business three years ago with a $21,000 expenditure for a fleet of 30 canoes. These are expected to last seven more years, at which time a new fleet must be purchased.

Required: Matt is happy with the steady rental average of 6,400 per year. For this number of rentals, what price should he charge per rental for the business to make a 20 percent life-cycle return on investment?

Reference no: EM13877391

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