Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor with Amazon Logistics. The vehicle would cost $131,250 and generate delivery revenue of $35,000 for each of the next 6 years. If Robinson Co. purchases the vehicle, it will take a loan for $105,000. The terms of the loan stipulate that 4% annual interest would be charged and that the loan would be repaid in 6 equal end of year payments. At the end of the 6 years, the vehicle will have a salvage value of $5,000. The tax rate is 40%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Robinson Co. uses an after-tax MARR of 10%, compute the PW and determine whether Robinson Co. should purchase the new business vehicle. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes.

Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor with Amazon Logistics. The vehicle would cost $131,250 and generate delivery revenue of $35,000 for each of the next 6 years. If Robinson Co. purchases the vehicle, it will take a loan for $105,000. The terms of the loan stipulate that 4% annual interest would be charged and that the loan would be repaid in 6 equal end of year payments. At the end of the 6 years, the vehicle will have a salvage value of $5,000. The tax rate is 40%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Robinson Co. uses an after-tax MARR of 10%, compute the PW and determine whether Robinson Co. should purchase the new business vehicle. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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