12.31 Deciding on a new venture *** Ben Wong wants to buy a taxi plate in...

 

Transcribed Image Text:

12.31 Deciding on a new venture *** Ben Wong wants to buy a taxi plate in the inner Melbourne suburb of Richmond. Taxi regis- tration plates (which confer the right to own and operate a taxi) are limited in supply and, hence, cost a great deal. Ben finds a plate for sale at $510000. A new vehicle fitted with radio, phone and meter will cost S51 000. He reckons on driving the cab himself for up to 12 hours a day, and maybe hiring a driver to drive it for another 6-8 hours each day. He thinks he can net $153 000 each year after all cash costs are paid. After five years of this high workload, he aims to sell the cab and plate. To be conservative, he allows only $102000 as the amount recouped. Required a. What is the PP for the taxi venture? b. If Ben allows $81 600 as his own driver's wage in his calculations, and he could earn 10 per cent elsewhere on his funds, what is the NPV for the project? c. In your own words, what does this NPV tell us? d. What are the IRRS (i) with no wage allowance for himself and (ii) after allowing for the wage? 12.31 Deciding on a new venture *** Ben Wong wants to buy a taxi plate in the inner Melbourne suburb of Richmond. Taxi regis- tration plates (which confer the right to own and operate a taxi) are limited in supply and, hence, cost a great deal. Ben finds a plate for sale at $510000. A new vehicle fitted with radio, phone and meter will cost S51 000. He reckons on driving the cab himself for up to 12 hours a day, and maybe hiring a driver to drive it for another 6-8 hours each day. He thinks he can net $153 000 each year after all cash costs are paid. After five years of this high workload, he aims to sell the cab and plate. To be conservative, he allows only $102000 as the amount recouped. Required a. What is the PP for the taxi venture? b. If Ben allows $81 600 as his own driver's wage in his calculations, and he could earn 10 per cent elsewhere on his funds, what is the NPV for the project? c. In your own words, what does this NPV tell us? d. What are the IRRS (i) with no wage allowance for himself and (ii) after allowing for the wage?

Answer rating: 100% (QA)

sh flws fr the txi venture re 1 3 4 Frmul Yer n sh flw F ... View the full answer