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Transcription of this question: 3.Cyprus ToursCyprus Tours, owned and operated by Nikolas Georgiadis, is a travel agency. It arrangessightseeing tours for groups Of tourists, as well as accommodation and restaurant bookings.Tourism is one Of the most important industries in Cyprus. Presently, Cyprus Tours hires cars fromlocal taxi companies to transport groups Of tourists on the island of Cyprus. The hiring of the cars isa major expense for Cyprus Tours.Nikolas is considering purchasing 10 cars so that Cyprus Tours can transport customers itself.The cost Of the 10 cars that run on petrol (gasoline) only is €400 000, and the firm forecasts thatthe net profit will increase by €85 000 per annum from the investment. The vehicles will have auseful life of 6 years.Pressure groups in Cyprus have demanded that all new vehicles be hybrid* in order to reducepollution. At low speed, hybrid cars pollute less. Taxi companies, however, Object to the demandfrom the pressure groups. A hybrid car costs 25% more than a petrol-only car to purchase, and thecost difference cannot be passed on to consumers.If Nikolas acts immediately, Cyprus Tours can purchase the petrol-only cars before any changesin the law. However, his son Dimitri, a university student, Objects to purchasing petrol-only cars.He argues that businesses have a social responsibility to protect the environment, which also ensuresthe long-term viability Of tourism in Cyprus. Nikolas fears that purchasing hybrid cars would puta financial burden on the company. Cyprus Tours would have to cut expenses by making severalbooking agents and administrative staff redundant. Cyprus Tours would also have to reduceyear-end bonuses.(Question 3 continued)(a)(b)(c)(d)Describe one marketing advantage for Cyprus Tours Of owning its own cars.Calculate, showing all your working:(i) the payback period and the average rate Of return (ARR) forpetrol-only cars.(ii) the payback period and the average rate Of return (ARR) forhybrid cars.thetheAnalyse the usefulness for Cyprus Tours Of using the payback period and theaverage rate Of return (ARR) methods for investment appraisal.Discuss whether Cyprus Tours should purchase the hybrid cars.[2 marks][3 marks][3 marks][5 marks][7 marks]

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