Fink Co. is interested in purchasing a new business vehicle. The vehicle costs $85,000 and will generate constant-dollar delivery revenue of $24,000 (year O dollars) for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $6,000. The tax rate is 21%, and annual inflation is 3%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Fink Co. uses an after-tax real interest MARR of 11%, compute the PW, and determine whether Fink Co. should purchase the new business vehicle.
Fink Co. is interested in purchasing a new business vehicle. The vehicle costs $85,000 and will generate constant-dollar delivery revenue of $24,000 (year O dollars) for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $6,000. The tax rate is 21%, and annual inflation is 3%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Fink Co. uses an after-tax real interest MARR of 11%, compute the PW, and determine whether Fink Co. should purchase the new business vehicle.
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 15PB: Urquhart Global purchases a building to house its administrative offices for $500,000. The best...
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