Question

The following cash savings are expected to occur if the city of Manhattan, Kansas, buys new trash trucks that cost $ 190,000 at the start of 2011. The city of Manhattan pays no taxes and uses a hurdle rate of 8 percent to evaluate investments.
2011 . 56,000
2012 . 52,000
2013 . 54,000
2014 . 58,000
2015 . 55,000
2016 . 52,000
Required:
A. What is the maximum price the city should pay for the trash trucks?
B. Calculate the net present value of the trash trucks.
C. Should the city of Manhattan acquire the trash trucks? Explain your answer.


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  • CreatedMarch 25, 2015
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