Question: Use the following information to solve the next three problems. acquisition of a new You have been asked by the president of your company to

Use the following information to solve the next three problems. acquisition of a new You have been asked by the president of your company to evaluate the pro special-purpose truck. The truck's basic price is $50,000, and it will cost another $10,000 to modify it for special use by your firm. The truck falls in the MACRS 3-year class, and it will be sold after three years for $20,000. Use of the truck will require an increase in net operating working capital (spare parts inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save the firm $20,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. The three-year MACRS schedule is as follows: Year Percentage 33.3333% 44.4444% 14.8149% 7.4074 % 4 13. What is the cash flow at year 0? a. -$50,000 b. -$52,600 c. -S60,000 d. -$62,000 e. None of the above 14. What is the operating cash flow in Year 1? a. $12,000 b. $17,333 c. $18,667 d. $20,000 e. none of the above 15. If the cost of capital for this project is 10 percent. What is its NPV? a. -$13,398 b. -$11,896 c. $ 3,047 d. $ 1,544 e. None of the above

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!

The following information applies to the next three problems. You have been asked to evaluate the proposed acquisition of a new truck. The truck's price is $60,000. The truck falls into the MACRS...

9. Erlanger Construction is considering the following project. The project will generate the following subsequent cash lows: t 1 $400 12-$500 13 $200 The project's payback is 1.5 years (i.e, initial...

pleaaase pleaase help this four are all connected to each other thank youuuu (The following information applies to the next four problems.) sation 27 yel wered ked out of 3 Flag estion You have been...

(The following information applies to the next four problems.) You have been asked by the president of the Farr Construction Company to evaluate the proposed acquisition of a new earth mover. The...

Version A (The following information applies to the next four problems.) You have been asked by the president of your company to new computer. The computer's price is $40,000, and it falls into the...

The following information is for the next four questions (Questions 7-10). You have been asked by the president of your company to evaluate the proposed acquisition of a piece of new equipment for...

In the year of his death, J owned a rental property land (FMV $250,000; cost $200,000), building FMV $340,000; cost $300,000; UCC $200,000). In his Will, he bequeathed the property to his daughter....

2. A medical insurance policy that specifies a $3,500 per illness basis deductible, an 90% co-insurance clause, internal limits of $500 per day on hospital room and board, and $8,000 as the maximum...

Do these equations have a solution? Find the solution if it exists. Explain why when it does not. - 2 x + 3 y + x = 2

The law passed by Venizelos that aimed at maintaining socio - political order but which was abused during the Metals dictatorship was?

Identify challenges for HRM professionals related to casual employment practices.

Provide a critique on the multi-phase intervention to improve internal service at United Bank. What do you see as its main strengths? How about its main weaknesses?

Why is internal service important, and why is effective internal service often lacking in organizations?