A university student at Queen's has decided to help fund his university education by purchasing a...

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A university student at Queen's has decided to help fund his university education by purchasing a car and running a taxi business on the side for the next 10 years. He has asked you to help him decide if this business venture will be profitable. He has decided to purchase a new Honda Civic for $20,000 and estimates that he will be able to sell the vehicle for $2,000 at the end of the 10 years. He estimates that his fuel and maintenance costs will be $1,500 per year for the first five years and will then increase every year by $250 (e.g. Year 6 costs will be $1,750). He can borrow the money from the bank at an interest rate of 0.486755% compounded monthly. a. Draw a cash flow diagram for the taxi business. b. Determine the present value of the proposed business. c. How much money would he have to make, on average per year, to breakeven? A university student at Queen's has decided to help fund his university education by purchasing a car and running a taxi business on the side for the next 10 years. He has asked you to help him decide if this business venture will be profitable. He has decided to purchase a new Honda Civic for $20,000 and estimates that he will be able to sell the vehicle for $2,000 at the end of the 10 years. He estimates that his fuel and maintenance costs will be $1,500 per year for the first five years and will then increase every year by $250 (e.g. Year 6 costs will be $1,750). He can borrow the money from the bank at an interest rate of 0.486755% compounded monthly. a. Draw a cash flow diagram for the taxi business. b. Determine the present value of the proposed business. c. How much money would he have to make, on average per year, to breakeven?

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