Financial Engineering

Question 2

Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor with Amazon Logistics. The vehicle would cost $75,000 and generate delivery revenue of $30,000 for each of the next 6 years. If Robinson Co. purchases the vehicle, it will take a loan for $60,000. The terms of the loan stipulate that 4% annual interest would be charged and that the loan would be repaid in 6 equal end of year payments. At the end of the 6 years, the vehicle will have a salvage value of $10,000. The tax rate is 40%. Assuming that the vehicle is depreciated using MACRS (5-year

property class) and that Robinson Co. uses an after-tax MARR of 10%, compute the PW and determine whether Robinson Co. should purchase the new business vehicle.

(a) What is the present worth? Make a detailed spreadsheet table of all the components. Indicate all the formulas. Carry all interim calculations to 5 decimal places and then round final answer to a whole number.

(b) Should Robinson Co. should purchase the new business vehicle? Yes. No. Not enough information.

I need the answer ASAP. The wrong answer will get downvoted. Thanks.