Question: Bob's Taxi Co. is considering adding 5 taxis to its fleet. It can either purchase or lease the taxis. If purchased, each taxi has an
Bob's Taxi Co. is considering adding 5 taxis to its fleet. It can either purchase or lease the taxis. If purchased, each taxi has an initial cost of $18,000; annual O&M costs of $3,750, and a salvage value of $3,000. Taxis qualify as 3-yr property. If the taxis are leased, beginning-of-year payments of 5,900/taxi, plus operating costs of $1,800/taxi, will be incurred. The taxis will bring in $45,000 in total revenue a year. Using a 5-yr planning horizon, a 40% tax rate, a 10% ATMARR, and a Pw analysis, should the trucks be purchased or leased? Please show before tax cash flow, depreciation amount, taxable income, and taxes paid, after tax cash flow for each year and PW for each option 4)
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