Question: Please DO NOT COPY ANOTHER ANSWER. THIS ONE IS DIFFERENT, THE DEPRECIATION RATE IS WEIRD, ITS NOT 30%. PLEASE ACTUALLY DO THE PROBLEM AND HELP

Please DO NOT COPY ANOTHER ANSWER. THIS ONE IS DIFFERENT, THE DEPRECIATION RATE IS WEIRD, ITS NOT 30%. PLEASE ACTUALLY DO THE PROBLEM AND HELP ME. THANK YOU.

Bobby Jones, the club pro at Pebble Beach Golf Club, is considering replacing his fleet of golf carts. He bought the existing fleet of 100 EZ-GO carts two years ago for $2,000 per cart. He is considering replacing them with a new model Club Car. Each Club Car has GPS, a cooler, and a ball/club cleaner. Each Club Car costs $3,000. The golf carts are 5-year property with depreciation rates of 20%, 32%, 19.2%, 11.52%, and 11.52% in the first five years. If Jones buys the new Club Cars, then he will keep them for three years and he expects to be able to sell them for $1,500 per cart. If Jones keeps the EZ-GO carts, then he expects that he could sell them for $250 per cart in three years. If Jones replaces the carts, then he expects incremental EBITDA of $54,000 per annum. What is free cash flow in the terminal year (three years after replacement)? Assume a tax rate of 35%. (Round your answer to the nearest dollar.)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!