I have tried to follow solutions online step by step and get $40.38 which is inc
ID: 2339978 • Letter: I
Question
I have tried to follow solutions online step by step and get $40.38 which is inccorect. I also have already asked this question on here and the answer that was given to me ($34.16) is also inccorrect. So i am asking it again, can someone please provide the right solution with explanations.
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: Fixed Costs Variable Costs Canoe maintenance Licenses and permits Vehicle leases Station lease Advertising Operating costs $3,050 3,750 6,150 7,670 6,750 21,750 $10.00 8.00 8.00 Quality Craft Rentals began business with a $27,500 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 6,900 per year. Required Matt is happy with the steady rental average of 6,900 per year. For this number of rentals, what price should he charge per rental for the business to make an annual 17% before-tax return on assets using life-cycle costs? (Do not round intermediate calculations Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Price per rental 40.38Explanation / Answer
Total Life Cycle Costs = Total Fixed Costs + Total variable costs + Total Fleet Cost
a. Total Fixed Costs = ($3050 + 3750 + 6150 + 7670 + 6750 + 21750) * 10 Years
Total Fixed Costs = $491200
b. Total Variablce Costs = ($10 + 8 + 8) * 6900 * 10
Total Variablce Costs = $1794000
Total Life Cycle Costs = Total Fixed Costs + Total variable costs + Total Fleet Cost
Total Life Cycle Costs = 491200 + 1794000 + 27500
Total Life Cycle Costs = $1870620
2. Total Income required = Life Cycle costs / (1 - return )
Total Income required = 1870620 / (1 - 0.17 )
Total Income required = 2253759.04
3. Price per rental = Total Income required / 69000
Price per rental = 2253759.04 / 69000
Price per rental = $32.66