The buses are rather old - average age 14 years. Gotham School Board wants to replace the entire fleet with new buses. They have requested you to carry out financial analysis of such a replacement and provide a written report to the School Board. Mr. Alfred Pennyworth (full name - Alfred Thaddeus Crane Pennyworth), a close confidant of Batman has provided following information on the project I Gotham County Planning horizon used by Gotham - 14 years Discount Rate used in the analysis = 7% Number of students = 38,250. It is expected to remain unchanged for next 15 years. Gotham has signed a special 14-year agreement with Shell Oil Company on the price of Diesel Fuel. The price is set at $2.90 per gallon for the coming year. The contract calls for 5% per year increase for next 14 years . Current Fleet of Buses and their Routes: Buses and Routes: Size of the fleet = 355 buses Number of Bus Routes = 340. This indicates that on the average 340 buses are running. The remaining 15 buses are acting as backup and/or in the garage being serviced. Average Market value of the buses today = $8,300 each Average fuel efficiency = 7.1 miles per gallon Maintenance including insurance = $11,000/year/bus, escalating at 4% per year. This cost is incurred by every bus in the fleet. Expected resale value (market value) 14 years from today = $0 Average miles per route = 55. This is the average miles driven per bus per day. On the average, the buses operate 285 days per year. . . . . . Bus Upgrades If the current fleet of 355 buses are to be used for next 14 years, they must go through a major makeover of both inside and outside. Additional details on makeover The makeover costs $19.000 per bus. Makeover is done for the entire fleet of 355 buses Upgrade schedule Now - 160 buses end of year 1 - 120 buses end of year 2-75 buses . . Labor Cost The labor cost listed is only for bus drivers. Other labor cost like mechanics, schedulers etc. are expected to remain the same whether the fleet is replaced or not and therefore are not provided Paid number of drives = number of buses operating per day = 340 Average drivers wage = $20/hour . Average number of hours per day = 5 Average number of days = 285 (same as the one given in Bus/Route details, above) . . Proposed Fleet of New Buses and their Routes: Buses and Routes: Fleet size = 336. This is a reduction of 19 buses from the current fleet. Number of Bus Routes = 320. This is a reduction of 20 routes - feasible because of highe capacity of new buses. The figure indicates that on any given day, 320 buses are running Purchase price of new buses = $106,000 each Average fuel efficiency = 9.8 miles per gallon Maintenance including insurance = $9,600/year/bus, escalating at 4% per year. This cost is incurred by every bus in the fleet. Expected resale value of the new bus = $10,000 at the end of 14 years. Average miles per route = 59. This is the average miles driven per bus per day. On the average, the buses operate 285 days per year . . . . Bus Upgrades No upgrades are required Labor Cost The cost is shown only for bus drivers. Other labor cost like mechanics, schedulers etc. are expected to remain the same whether the fleet is replaced or not. They are not provided Paid number of drives = number of buses operating per day = 320 Average drivers wage = $20/hour Average number of hours per day = 5 Average number of days = 285 (same as the one given in Bus/Route details, above) . Your report should look at the cost of ownership of the fleet over Gotham's planning horizon of 14 years You would compare the annual worth of the two alternatives and present the results in a professional looking 1 to 2-page report supported by any tables or work sheets. Make a recommendation - should Gotham replace the fleet? Should the keep and upgrade the current fleet? Rationalize. Bring out any non-economic factors into your discussion