Qwikshare is a new not-for-profit organization

Assignment Help Financial Management
Reference no: EM13846780

QwikShare

QwikShare is a new not-for-profit organization that will rent low-emissions automobiles at QwikStops in suburban areas in order to provide an environmentally friendly transportation option to its customers. The organization plans to rent automobiles by the day only, and it will operate 7 days a week, 365 days per year.

On the first day of FY 2016, QwikShare will take out a pre-approved loan of $240,000. The loan will have an annual interest rate of 4%, with annual principal repayments of $30,000 per year to begin in FY 2017. Principal repayments and interest payments will be due the last day of each fiscal year. The organization will immediately use the loan to purchase its first fleet of 15 automobiles. Each automobile will be purchased for $16,000, will have a useful life of 7 years, and can be sold for $2,000 at the end of its useful life.

QwikShare will have full-time staffs that include a Chief Executive Office, a Chief Financial Officer, an Operations Manager, two customer service agents, and two automotive technicians. Full-time staff salaries will total $550,000 in FY 2016, and health benefits will equate to 30% of full-time staff salaries. The organization will also employ 10 part-time staff members who will earn an average of $12.50 per hour in wages and will work an average of 20 hours per week. QwikShare will lease its office and QwikStop spaces for $9,000 per month, it will use $1,000 per month in water and electrical utilities, and it will use $2,500 in supplies per month. In addition, the organization will incur $800 per month per automobile in maintenance and insurance expenses. QwikShare will also cover the cost of fuel at a discounted rate; the organization anticipates that it will cost $30 per car per day that a car is rented. All expenses will be paid as resources are consumed, except supplies, for which the organization will pay with a two-month lag.

In the first month of FY 2016, QwikShare expects supporters will pledge a total of $1,000,000 in donations to help support its first year of operations. QwikShare will charge $65 per day for an automobile rental, and rental fees are collected via pre-stored credit cards the moment customers enter the vehicles they have reserved. In addition, the organization will be supported by a new federal grant that will pay QwikShare $0.50 for every pound of carbon dioxide (CO2) emissions its rentals prevent during FY 2016. QwikShare estimates that each of its low-emissions automobiles will prevent 50 pounds of CO2 emissions per day they are in use during FY 2016. Revenues from the federal grant will be received with a one-month lag.

Using break-even analysis, calculate the minimum number of automobiles QwikShare must rent per day in FY 2016 in order to break even. (Hint: Since the problem is asking for the break-even volume of rentals “per day,” you should make certain all of your values for each variable are expressed accordingly.)

Note: There is no template for this assignment. To receive full credit for this problem, you must use Excel (not Word), use break-even analysis (not an operating budget), and carefully show each step of your calculation in solving this problem.

b. Using target profit analysis, calculate the minimum number of automobiles QwikShare must rent per day in FY 2016 in order to earn an annual profit of $109,500.

c. Prepare an annual operating budget for FY 2016, assuming the organization will rent 10 cars per day, on average, in FY 2016.

d. Prepare a quarterly cash budget for FY 2016 (showing each of the four quarters and the annual total), assuming the organization will rent 10 cars per day, on average, in FY 2016. Since this is a new organization, the beginning cash balance should be $0.

Do the reading assignment for the next class (Chapter 4 p. 136-end and Chapter 8 up to p. 283) and then answer the following reading comprehension question: Suppose that it is now the end of FY 2016 and QwikShare’s fuel expenses turned out to be significantly higher than expected. Briefly describe the three potential reasons why this unfavorable cost variance might have occurred. You may enter your answers in an Excel spreadsheet or in a Word document.

Reference no: EM13846780

Questions Cloud

Discuss the rule in sharp v. dawes and the exceptions thereo : Discuss the rule in sharp v. Dawes and the exceptions thereof
Explain how investigator prepares a criminal case for trial : 1) Explain how an investigator prepares a criminal case for trial. 2) Explain the proper courtroom demeanor needed for an investigator and how his/her demeanor, looks, and body language can affect a trial. 3) Find an article from the Web in which an ..
What is the present value of that annuity if discount rate : An investment will provide you with $100 at the end of each year for the next 10 years. What is the present value of that annuity if the discount rate is 8% annually? What is the present value of the above if the payments are received at the beginnin..
State a clear and concise legal issue statement : State a clear and concise legal issue statement, which describes the primary legal issue you've been asked to research. Your legal issue statement ought to be in the form of a question that can be answered yes or not.
Qwikshare is a new not-for-profit organization : QwikShare is a new not-for-profit organization that will rent low-emissions automobiles at QwikStops in suburban areas in order to provide an environmentally friendly transportation option to its customers.
Describe real-life situations to which normal distribution : Normal 0 false false false EN-US X-NONE X-NONE describe real-life situation..
A recently formed committee to deal with numerous : Scenario: You are a member of a recently formed committee to deal with numerous complaints against police and correction officers in your town and are asked to determine if there is merit to these allegations and develop a protocol to address the cur..
Determine the range of interest rates : Moussa Sangare is purchasing a used car and has the option of two possible paymentplans: Determine the range of interest rates for which Plan B is better for Moussa.
Considering both federal and state personal taxes : George and Margaret Wealthy are in the 42 percent tax bracket, considering both federal and state personal taxes. Norman Briggs, then CEO of Community General Hospital, has been aggressively pursuing the couple to contribute $400 thousand to the hosp..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Mortgage to finance the purchase of a large tract of land

You have just arranged for a $1,580,000 mortgage to finance the purchase of a large tract of land. The mortgage has an APR of 5.8 percent, and it calls for monthly payments over the next 20 years. However, the loan has an eight-year balloon payment, ..

  Convert to pesos to cover the operating expenses

Break-even Financing. Lakeland, Inc., is a U.S.-based MNC with a subsidiary in Mexico.  Its Mexican subsidiary needs a one-year loan of 10 million pesos for operating expenses.  Since the Mexican interest rate is 70 percent, Lakeland is considering b..

  Discuss importance of budgeting for these types of companies

Consider companies that have very distinct seasonal variations. Some companies may have periods of very little to no sales. Discuss the importance of budgeting for these types of companies.

  What does the market believe will be the stock price

You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) has a beta of 0.9. The risk-free rate is 5.9%, and the market risk premium is 5.5%. Keller currently se..

  What must the expected return on this stock be

A stock has a beta of 1.18, the expected return on the market is 11.2 percent, and the risk-free rate is 4.85 percent.

  Prepare the forecast financial statements

What level of borrowing or equity-raising is required in this scenario - Prepare the forecast financial statements for Qantas for the year.

  What are the depreciation amounts in year one and year eight

An injection molding machine can be purchased and installed for $90,000. It is expected to be kept in service for eight years. It is believed that $10,000 can be obtained when the machine is disposed of the at the end of year eight. What are the depr..

  Discuss different types of investment appraisal methods

Discuss and compare the different types of investment appraisal methods My Velo can use, including a discussion of the advantages and disadvantages of each.

  Calculating cost of equity

Stock in CDB Industries has a beta of .90. The market risk premium is 7 percent, and T-bills are currently yielding 3.5 percent. CDBs most recent dividend was $1.80 per share, and dividends are expected to grow at a 5 percent annual rate indefinitely..

  What would be the net cash flow from above activities

What would be the net cash flow from above activities? Dividend income received by a corporation. Which of the following as a business entity pays federal income tax?

  Question 1the approach known as new public management npm

question 1the approach known as new public management npm has been seen by many as the new paradigm that is replacing

  What will be the required return on your portfolio

You have been managing a $10 million portfolio that has a beta of 1.4 and a required rate of return of 14%. The current risk free rate is 5.5%. Assume that you will receive another 600,000. If you invest the money in a stock with a beta of 0.75, what..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd