Question

Matt Simpson owns and operates Quality Craft Rentals, which offers canoe rentals and shuttle service on the Nantahala River. Customers can rent canoes at one station, enter the river there, and exit at one of two designated locations to catch a shuttle that returns them to their vehicles at the station they entered. Following are the costs involved in providing this service each year: Variable Costs $ 2.50 Canoe maintenance Licenses and permits Vehicle leases Station lease Advertising Operating costs Fixed Costs $ 2,300 3,000 5,400 6,920 6,000 21,000 Quality Craft Rentals began business with a $25,000 expenditure for a fleet of 30 canoes. These are expected to last 10 more years, at which time a new fleet must be purchased. Rentals have been stable at about 6,400 per year. Required: Matt is happy with the steady rental average of 6,400 per year. For this number of rentals, what price should he charge per rental for the business to make an annual 20% before-tax return on assets using life-cycle costs? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price per rental

Answer 1

solution & particulars -Amount (6) fixed costo 2300 3000 suoo 6920 Good 21000 cance maite nance licenses and permits vehicle leases station leases Advertising operating costs Depreciation (25000) vastable cost Canoe maintenance (Ghoux 25) Advertising (6houx 0.5) operating costs (6400x 005) 2500 u7180 TO 16ooo 3200 3200 28 uoo 69520 5000 Total cost Add: Return @26). (25000, 26%) Total expected bevenue Average rentals per annum price per sental. (1950) 6400 74520 6uod S 11.64