The local authority applies a cost of capital of 5% in evaluating capital investmentproposals.REQUIRED:a)Find the net present value of the differential cash flows attaching to purchase of thenew turntable ladder, and on that basis, advise the local authority as to the bestcourse of action.b)Discuss three (3) qualitative factors which may be relevant to the final decision,providing a brief explanation of the significance of each.1 QUESTION CA local authority's Fire Service is considering replacement of a turntable ladder whichalthough still serviceable, has steeply rising maintenance costs, and it is thought that areplacement will proof less expensive in the long term. The purchase cost of a newturntable ladder will be $360,000 - half payable immediately and half one year from now.The following information is available: -Existing 8 Years8 yearsReplacement 8 Years8 yearsEstimated useful lifeEstimatedcosts:Year 140,00010,000Year 245,00010,000Year 350,00014,000Year 460,00015,000Year 572,00018,000Year 680,00018,000Year 790,00020,000Year 898,00022,000Full OverhaulsYear 25,000Year 410,0004,000Year 614,000Estimated Resale ValueNow10,000Year 81,000maintenance8,000

Calculation of present value of estimated cash outflows local authorities fire services .…

a) Find the net present value of the differential cash flows attaching to purchase of the new turntable ladder, and on that basis, advise the local authority as to the best course of action. b) Discuss three (3) qualitative factors which may be relevant to the final decision, providing a brief explanation of the significance of each.

a) Find the net present value of the differential cash flows attaching to purchase of the new turntable ladder, and on that basis, advise the local authority as to the best course of action. b) Discuss three (3) qualitative factors which may be relevant to the final decision, providing a brief explanation of the significance of each.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 10P

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