Demand at each particular exchange rate, Financial Management

Assignment Help:

The usual number of passengers using the service is dependent upon the demand at each particular exchange rate.

At 1·52 Euro/£ expected demand = (0·33·)(500 + 460 + 420) = 460

At 1·54 Euro/£ expected demand = (0·33·) (550 + 520 + 450) = 506·67

At 1·65 Euro/£ expected demand = (0·33·) (600 + 580 +500) = 560

The expected demand is so

= (0·2) (460) + (0.5) (506·67) + (0·3) (560)

= 92 + 253·33 + 168

= 513·3 per train

= 1026·7 per day

(b)

WORKINGS

45% of passengers utilize the catering service spending $4.50 per head on average. Two trains are run daily for 360 days per year this give

28_Demand at each particular exchange rate.png

Gross catering receipts are below an average of £2200 per day so the 5% commission doesn't apply.

Contribution from the current service

Contribution £246985 per year

 

 

 

Cash Flows: In House Option

102_Demand at each particular exchange rate1.png

NET PRESENT VALUE = £220828

Cash Flows: Contract Out Option

662_Demand at each particular exchange rate2.png

NET PRESENT VALUE = £266350

This option therefore offers an NPV which is £45522 greater than the in-house option which means that profits could be increased by contracting out the catering service.


Related Discussions:- Demand at each particular exchange rate

Functions of treasurer, Functions of Treasurer:- (1) Cash Management: -...

Functions of Treasurer:- (1) Cash Management: - It comprises the managing of cash receipts and cash payments of the business. (2) Banking Relations: - It comprises operating

Measure a project’s risk as the change in the cv, Define why we measure a p...

Define why we measure a project’s risk as the change in the CV. We calculate a project’s risk as the change in the coefficient of variation since this focuses on the change in

Explain learning outcomes of financial management, Explain learning outcome...

Explain learning outcomes of financial management By the end of this subject guide as well as having done the relevant readings and activities you should be able to

Purchasing power parity achieved by us and canadian dollor, Under what circ...

Under what circumstance would the U.S. dollar and the Canadian dollar be said to have achieved purchasing power parity? The U.S. dollar and the Canadian dollar possible conside

The financial services authority in the united kingdom, The Financial Servi...

The Financial Services Authority in the United Kingdom: The Financial Services Authority (FSA) in the United Kingdom (UK) is the financial watchdog. It is a company limited by

What are the benefits of traditional approach, What are the benefits of Tra...

What are the benefits of Traditional approach Traditional approach had a very narrow perception and was devoid of an integrated conceptual and analytical framework. It had pre

Just-in-time inventory management, Q. Just-in-time inventory management? ...

Q. Just-in-time inventory management? It considerably improves the short-term liquidity of the business with a maximum financing requirement of $138533 rather than $155640. The

Determine the key factor affecting financing costs, Determine The key facto...

Determine The key factor affecting financing Costs Because cost of capital is measured under the assumption that both firm's asset structure and its capital (financial) structu

Interference of central bank in markets, Interference of Central bank in Ma...

Interference of Central bank in Markets: Some dilemmas exist in the issue of central bank intervention in the market to correct the volatilities in the prices. In some countrie

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd