The LIRR is a passenger transportation company in New York City. The LIRR has 30 different trains in its fleet. There ar

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The LIRR is a passenger transportation company in New
York City. The LIRR has 30 different trains in its fleet. There are
30 drivers and 10 office persons working for the LIRR. On average,
each of them works 8 hours per day and 220 days per year, with a
wage of $30.00 per hour. On average, each train is worth $60000.00.
Each Train takes 50 trips per day and travels on average four
kilometers per trip. Maintenance fees are \$1.00 per km. Passengers
pay \$2.00 as a fixed fee plus \$3.00 per km as they are
transported by train. To reduce empty trains last year, The LIRR
signed a contract with an online reduced fare ticket site, ETrax,
which helped reduce the empty train ratio from 50% to 10%. The LIRR
has to pay ETrax \$300.00 for each of its cars per month, which is
considered as an investment capital by the CEO of The LIRR because
the shortest contract period is 5 years.

Experts from the transit industry question the high expenses
charged by ETrax. You are hired as a consultant by ETrax to analyze
the operations and financial data of The LIRR, seeking to show the
benefits LIRR receives from using ETrax’s services.

To accurately answer this question, you have to answer the
following questions:
Create a ROIC (Profit/Capital) tree.
Populate the tree with numbers.
What is the current ROIC in percentage? (Note: profits
should be annualized.)
What is the profit per day before The LIRR signs the
contract with ETrax? (Suppose the average trip distance with a
passenger for a car was the same as today.)
Based on the results above, you are confident that ETrax
is a highly worthwhile partnership for the LIRR. To further prove
your point, calculate the non-empty ratio of a car that achieves
breakeven. What is the ratio in percentage for The
LIRR?