Laura wants to buy a delivery truck. The truck costs $117,000, and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 8% and her tax rate is 20%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 51P
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Laura wants to buy a delivery truck. The truck costs $117,000, and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 8% and her tax rate is 20%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms?
 
 
 
 
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