Question 2 EV-Go Car Rentals (EVG) is a newly-established electric car rental company in Singapore. It...

Transcribed Image Text:

Question 2 EV-Go Car Rentals (EVG) is a newly-established electric car rental company in Singapore. It seeks to provide affordable car services in the midst of rising car prices in Singapore. The business data in Table 2 have been gathered by the CEO for business analysis. (a) Hourly Rental Rate Per Car Hourly Variable Cost Per Car Total Fleet Size Avg Fleet Demand % Avg Daily Rental Hours Per Car Annual Cost Per Car Monthly Business Overheads (b) $80.00 $30.00 1,500 60% 4.00 $10,000 $550,000 30 Days per month Table 2. EVG business data Hourly Rental Rate is a simple all-in-one hourly price for renting a car. Shown as Hourly Variable Cost Per Car, EVG bears all costs associated with the use of a rented car including electricity, insurance, maintenance and repairs. Total Fleet Size shows the total number of cars available for rental. Avg Fleet Demand refers to the average number of cars rented out on any day of the year and is expressed as a percentage of the total fleet size. On average, each car is expected to be rented out as shown by Avg Daily Rental Hours Per Car. Annua! depreciation of each car is shown as Annual Cost Per Car. For the purpose of analysis, EVG operates based on 30 days a month. Its expected fixed monthly expenses are shown as Monthly Business Overheads. Create a model to help the EVG analyse this car rental business. Use your model to determine its Annual Net Profit. If the CEO wants to achieve an Annual Net Profit of auf exactly $45 million, how can this be accomplished? (10 marks) Market research has indicated that Avg Fleet Demand will decline by 2% for every dollar increase in the Hourly Rental Rate. It will also cause Avg Daily Rental Hours per car to reduce by half an hour per rental dollar increase. Draw, in a single graph, the price (i.e., Hourly Rental Rate) elasticity of demand in terms of Avg Fleet Demand % and Avg Daily Rental Hours. The marketing manager has advised the CEO that the company can make more profit by raising the Hourly Rental Rate. Comment on whether this is true. Justify your answer quantitatively. (10 marks) Question 2 EV-Go Car Rentals (EVG) is a newly-established electric car rental company in Singapore. It seeks to provide affordable car services in the midst of rising car prices in Singapore. The business data in Table 2 have been gathered by the CEO for business analysis. (a) Hourly Rental Rate Per Car Hourly Variable Cost Per Car Total Fleet Size Avg Fleet Demand % Avg Daily Rental Hours Per Car Annual Cost Per Car Monthly Business Overheads (b) $80.00 $30.00 1,500 60% 4.00 $10,000 $550,000 30 Days per month Table 2. EVG business data Hourly Rental Rate is a simple all-in-one hourly price for renting a car. Shown as Hourly Variable Cost Per Car, EVG bears all costs associated with the use of a rented car including electricity, insurance, maintenance and repairs. Total Fleet Size shows the total number of cars available for rental. Avg Fleet Demand refers to the average number of cars rented out on any day of the year and is expressed as a percentage of the total fleet size. On average, each car is expected to be rented out as shown by Avg Daily Rental Hours Per Car. Annua! depreciation of each car is shown as Annual Cost Per Car. For the purpose of analysis, EVG operates based on 30 days a month. Its expected fixed monthly expenses are shown as Monthly Business Overheads. Create a model to help the EVG analyse this car rental business. Use your model to determine its Annual Net Profit. If the CEO wants to achieve an Annual Net Profit of auf exactly $45 million, how can this be accomplished? (10 marks) Market research has indicated that Avg Fleet Demand will decline by 2% for every dollar increase in the Hourly Rental Rate. It will also cause Avg Daily Rental Hours per car to reduce by half an hour per rental dollar increase. Draw, in a single graph, the price (i.e., Hourly Rental Rate) elasticity of demand in terms of Avg Fleet Demand % and Avg Daily Rental Hours. The marketing manager has advised the CEO that the company can make more profit by raising the Hourly Rental Rate. Comment on whether this is true. Justify your answer quantitatively. (10 marks)

Answer rating: 100% (QA)

a To determine the Annual Net Profit for EVG we need to consider the revenue and costs associated with the car rental business Revenue The revenue generated by EVG can be calculated as follows Total R... View the full answer