Assume that your cohort is staring a new business. You will buy 20 new cars and rent
Question:
Assume that your cohort is staring a new business. You will buy 20 new cars and rent them to Uber drivers on a weekly basis in Hammond. You expect to be in business for 20 - 25 years.
Suppose your company must choose between two brands of cars, Brand C and Brand D, for your initial purchase. Brand C costs more because the cars a larger and will last longer. Ignore taxes. Assume a discount rate of 10% per year.
The annual cash inflows (revenue) and cash outflows (expenses) per car for both brands are below:
Brand C
TODAY YR 1 YR 2 YR 3 YR4 YR5
cash inflows $36,000 $40,000 $44,000 $48,000 $52,000
cash outflows -$80,000 -$5,000 -$7,000 -$9,000 -$15,000 -$16,000
Brand D
TODAY YR 1 YR 2 YR 3 YR4
cash inflows $30,000 $33,000 $35,000 $38,000
cash outflows -$40,000 -$4,000 -$6,000 -$8,000 -$11,000
Assume each car will be replaced at the end of its useful life. Which would you pick? In other words, calculate cashflows on a per-year basis.
Please show work without using EXCEL.