Tabletop Ranches, Inc. is considering the purchase of a new helicopter for $325,000. The firm's old helicopter has a book value of $85,000 but can only be sold for $60,000. 

The new helicopter will be subject to 25% CCA. It is expected to save $62,000 for 7 years after taxes through reduced fuel and maintenance expenses. Tabletop Ranch is in the 40% tax bracket and has a 12% cost of capital. 

Calculate the net present value of the helicopter purchase and state whether or not the firm should buy it.

Answer rating: 100% (QA)

The firm should buy the helicopter because it has a positive NPV Explanation Incremental ... View the full answer