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. Canoe maintenance Licenses and permits Vehicle leases Station lease Advertising Operating costs Fixed Costs $ 2,800 3,500 5,900 7,420 6,500 21,500 Variable Costs $7.50 Price per rental 0 0 e 5.50 5.50 Quality Craft Rentals began business with a $30,000 expenditure for a fleet of 30 canoes. These are expected to last 10 more years, which time a new fleet must be purchased. Rentals have been stable at about 7,400 per year.. Required: Matt is happy with the steady rental average of 7,400 per year. For this number of rentals, what price should he charge per rental for the business to make an annual 12% before-tax return on assets using life-cycle costs? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.
Canoe maintenance
Licenses and permits
Vehicle leases
Station lease
Advertising
Operating costs
Fixed Costs
$ 2,800
3,500
5,900
7,420
Price per rental
6,500
21,500
Variable Costs
$ 7.50
0
0
e
5.50
5.50
Quality Craft Rentals began business with a $30,000 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 7,400 per year..
Required:
Matt is happy with the steady rental average of 7,400 per year. For this number of rentals, what price should he charge per rental for
the business to make an annual 12% before-tax return on assets using life-cycle costs? (Do not round intermediate calculations.
Round your answer to 2 decimal places.)
Transcribed Image Text: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. Canoe maintenance Licenses and permits Vehicle leases Station lease Advertising Operating costs Fixed Costs $ 2,800 3,500 5,900 7,420 Price per rental 6,500 21,500 Variable Costs $ 7.50 0 0 e 5.50 5.50 Quality Craft Rentals began business with a $30,000 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 7,400 per year.. Required: Matt is happy with the steady rental average of 7,400 per year. For this number of rentals, what price should he charge per rental for the business to make an annual 12% before-tax return on assets using life-cycle costs? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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