Your firm has decided to test the use of EVs as upscale taxis. You are choosing...

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Your firm has decided to test the use of EVs as upscale taxis. You are choosing between an Audi and a Polestar. The Audi has an initial cost of $65,000 and an expected life of five years. It will be depreciated straight-line over its expected life. The income expected from the Audi is $48,000 per year and maintenance and electricity are expected to run $22,000. The Audi is expected to be worth $10,000 at the end of its very busy life. The Polestar has an initial cost of $75,000 and an expected life of 4 years. It will be depreciated straight-line over its expected life. The Polestar is expected to generate revenue of $52,000 per year and have associated expenses of $26,000. It is expected to be worth $8,000 at the end of its 4-year life. Your marginal tax rate is 35% and your required rate of return for this test run is 10%. What is the EAA of the Audi? Your firm has decided to test the use of EVs as upscale taxis. You are choosing between an Audi and a Polestar. The Audi has an initial cost of $65,000 and an expected life of five years. It will be depreciated straight-line over its expected life. The income expected from the Audi is $48,000 per year and maintenance and electricity are expected to run $22,000. The Audi is expected to be worth $10,000 at the end of its very busy life. The Polestar has an initial cost of $75,000 and an expected life of 4 years. It will be depreciated straight-line over its expected life. The Polestar is expected to generate revenue of $52,000 per year and have associated expenses of $26,000. It is expected to be worth $8,000 at the end of its 4-year life. Your marginal tax rate is 35% and your required rate of return for this test run is 10%. What is the EAA of the Audi?

Answer rating: 100% (QA)

Calculating the Equivalent Annual Annuity EAA of the Audi Step 1 Calculate the Annual Depreciation e... View the full answer