In the use of unmanned aerial vehicles (UAVs) that will shape the future of UAV applications, an
Question:
In the use of unmanned aerial vehicles (UAVs) that will shape the future of UAV applications, an online shopping company has purchased a group of UAVs for $84000. The market value is expected to decrease by $4000 per year. Also, the UAVs will be depreciated within 6 years. As cargo drones are a proven technology for the logistics industry, it is expected that the purchase of the group of UAVs will increase the company’s revenue by $16000 annually. Although, there is an expectation about the related operating expenses to be $42000 annually to operate fee-charging UAV services at certain times, the online shopping company’s effective income tax rate of is 40%, and its after-tax MARR is 15% per year. The company decides to use the cargo drones for 6 years to simplify the transportation of goods while offering faster, more environmentally friendly service than the alternative.
a) What would be the equivalent after-tax annual worth of this investment?
b) Is this investment profitable? Write your comments about your results.
Expert Answer:
a Salvage value after 6 years Cost Decline in market value each year 84000 40006 60000 Year 0 1 ... View the full answer
