The usual number of passengers using the service is dependent upon the demand at each particular exchange rate.

At 1·52 Euro/£ expected demand = (0·33·)(500 + 460 + 420) = 460

At 1·54 Euro/£ expected demand = (0·33·) (550 + 520 + 450) = 506·67

At 1·65 Euro/£ expected demand = (0·33·) (600 + 580 +500) = 560

The expected demand is so

= (0·2) (460) + (0.5) (506·67) + (0·3) (560)

= 92 + 253·33 + 168

= 513·3 per train

= 1026·7 per day

(b)

WORKINGS

45% of passengers utilize the catering service spending $4.50 per head on average. Two trains are run daily for 360 days per year this give

Gross catering receipts are below an average of £2200 per day so the 5% commission doesn't apply.

Contribution from the current service

Contribution £246985 per year

 

 

 

Cash Flows: In House Option

NET PRESENT VALUE = £220828

Cash Flows: Contract Out Option

NET PRESENT VALUE = £266350

This option therefore offers an NPV which is £45522 greater than the in-house option which means that profits could be increased by contracting out the catering service.

Posted Date: 7/11/2013 3:26:44 AM | Location : United States

Ask an Expert

Related Discussions:- Demand at each particular exchange rate, Assignment Help, Ask Question on Demand at each particular exchange rate, Get Answer, Expert's Help, Demand at each particular exchange rate Discussions

Write discussion on Demand at each particular exchange rate
Your posts are moderated

Write your message here..

Related Questions

Business venture, Project Plan for my new business venture is attached) ... Project Plan for my new business venture is attached) 1.     Your task is to take a look at every of the operational areas of the intended business, and verify  what financial i

305, I have an assignment due today and needs some help I have an assignment due today and needs some help

Main characteristics of the resource-based approach, Z Company is very succ... Z Company is very successful as market leader in digital media products where it has demonstrated its ability to innovate in new product development and design at a very fast pace,

Treasury returns resulting from yield curve movements, Robert Litterman and... Robert Litterman and Jose Scheinkman were the first to study how changes in the shapes of the yield curve affect the total return on the Treasury securities. The histor

How can we estimate that firm is going to benefit, Ho can we estimate that ... Ho can we estimate that firm is going to benefit from projec To calculate how firm is going to benefit from project we need to calculate whether firm is earning the required ra

Current assets management, how is operating cycle applicable to poultrybusi... how is operating cycle applicable to poultrybusiness in Uganda (broilers)

Short-term finnce, briefly discuss the three approaches to the short-term f... briefly discuss the three approaches to the short-term financing problems and examples of each

Increased common stock cash dividend signal to stock holder, Do you believe... Do you believe an increased common stock cash dividend can send a signal to the common stockholders?  If so, what signal might it send? An enhance in cash dividends is often se

Define mergers affect communities, How do mergers affect communities? A: ... How do mergers affect communities? A: While a locally controlled bank is merged into a bank headquartered somewhere else (an out-of-market merger), a few apprehension about the i

What are the main flaws of the profit maximisation criterion, What are the ... What are the main flaws of the profit maximisation criterion The main technical flaws of this criterion are i) ambiguity, ii) quality of benefits and iii) timing of be