Your company plans to expand its operation rather than outsourcing delivery service to the customers. The...
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Your company plans to expand its operation rather than outsourcing delivery service to the customers. The company is considering delivery itself. The company has two options, which are to either lease or own a truck. The truck will cost $75,000, it has a 35% of CCA rate, and the estimated salvage value is $10,000 after five years of usage. The truck can be leased for $12,000 per year. If the company has a marginal tax rate of 35% and its cost of debt financing is 6%, what is the NAV value? What would you recommend? PV of CCA [(C*t*d)/(d + r)]*[(1+0.5*r)/(1+r)] - (S*t*d)/(d+r)*(1/(1+r)^n) PV of Salvage s/(1+r)^n NAL = PV of Leasing - PV of Buying Your company plans to expand its operation rather than outsourcing delivery service to the customers. The company is considering delivery itself. The company has two options, which are to either lease or own a truck. The truck will cost $75,000, it has a 35% of CCA rate, and the estimated salvage value is $10,000 after five years of usage. The truck can be leased for $12,000 per year. If the company has a marginal tax rate of 35% and its cost of debt financing is 6%, what is the NAV value? What would you recommend? PV of CCA [(C*t*d)/(d + r)]*[(1+0.5*r)/(1+r)] - (S*t*d)/(d+r)*(1/(1+r)^n) PV of Salvage s/(1+r)^n NAL = PV of Leasing - PV of Buying
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NAL 12000035006006006 75000035006006006110065 10000035... View the full answer
Related Book For
Financial Accounting Information For Decisions
ISBN: 978-0324672701
6th Edition
Authors: Robert w Ingram, Thomas L Albright
Posted Date:
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