3. A delivery company is expanding its fleet of work vans at an initial cost of $100,000. Operation and maintenance costs for the new vehicles are expected to be $20,000/year for the next 10 years. After 10 years, the vans will be sold for a total of $10,000. The annual revenue increase associated with this fleet upgrade is expected to be $50,000. What is the company’s rate of return on this investment?

3. A delivery company is expanding its fleet of work vans at an initial cost of $100,000. Operation and maintenance costs for the new vehicles are expected to be $20,000/year for the next 10 years. After 10 years, the vans will be sold for a total of $10,000. The annual revenue increase associated with this fleet upgrade is expected to be $50,000. What is the company’s rate of return on this investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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