A tractor for over-the-road hauling is to be purchased by AgriGrow for $80,000. It is expected to
Question:
A tractor for over-the-road hauling is to be purchased by AgriGrow for $80,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for $3,800. Transportation cost savings are expected to be $140,000 per year; however, the cost of drivers is expected to be $53,000 per year, and operating expenses are expected to be $47,000 per year, including fuel, maintenance, insurance, and the like. The company’s marginal tax rate is 25 percent, and MARR is 10 percent on after-tax cash flows. Suppose that, to AgriGrow’s surprise, they actually dispose of the tractor at the end of the fourth tax year for $5,800. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after only 4 years.
-Use straight-line depreciation (no half-year convention).
-After-tax IRR:
-After-tax ERR:
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman