Omar is the owner of a private school is considering the purchase of six school buses to transport students to and from school events. The life of each bus is estimated to be 3 years, after which time the vehicles would have to be scrapped with no salvage value. School management doesn’t have money recently; it could go to finance through bank totally or partially. The school’s revenue mainly comes from tuition fees. According to the previous year’s school made profit which encourage management to expand the revenue by purchasing buses.

Suppose that Mr. Omar has hired you as a consultant to help them make the decision. Please draft an official memo to them with your analysis and recommendations. Your submission should cover the following questions:

1. Briefly, summarize the key facts of the case and identify the problem being faced by Mr. Omar. In other words, what is the decision that they need to make?

2. What are some approaches that can be used to solve this problem? What are some various criteria or metrics that can be used to help make this decision?

3. What are the important factors the financial manager should consider before making decision? Explain?Â

4. If the figures are not certain, how would you deal with this situation?

5. If the initial investment OMR 600,000 and the project is expected to generate cash flow after adjustment OMR 250000, OMR 300000, OMR 200000 at the end of year 1,2 and 3 respectively. Is it wealthy to purchase the buses? explain

Answer rating: 100% (QA)

Key factor School is considering the purchase of six school buses to transport students to and from school event The life of each bus is estimated to ... View the full answer