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By investing in a new truck, a shipping company can reduce its costs by $8,000 in the t first year of operation, with the savings reducing by $1,000 per year thereafter. The tru purchased for $30,000 and is expected to depreciate by $12,000 in year 1, $9,000 in yea $6,000 in year 3 and $3,000 in year 4. The truck will be sold at the end of year 5. What value will result in a 12% after-tax rate of rate for the company? Assume a tax rate of 3

By investing in a new truck, a shipping company can reduce its costs by $8,000 in the t first year of operation, with the savings reducing by $1,000 per year thereafter. The tru purchased for $30,000 and is expected to depreciate by $12,000 in year 1, $9,000 in yea $6,000 in year 3 and $3,000 in year 4. The truck will be sold at the end of year 5. What value will result in a 12% after-tax rate of rate for the company? Assume a tax rate of 3

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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By investing in a new truck, a shipping company can reduce its costs by $8,000 in the truck's first year of operation, with the savings reducing by $1,000 per year thereafter. The truck was purchased for $30,000 and is expected to depreciate by $12,000 in year 1, $9,000 in year 2, $6,000 in year 3 and $3,000 in year 4. The truck will be sold at the end of year 5. What resale value will result in a 12% after-tax rate of rate for the company? Assume a tax rate of 34%.
Transcribed Image Text:By investing in a new truck, a shipping company can reduce its costs by $8,000 in the truck's first year of operation, with the savings reducing by $1,000 per year thereafter. The truck was purchased for $30,000 and is expected to depreciate by $12,000 in year 1, $9,000 in year 2, $6,000 in year 3 and $3,000 in year 4. The truck will be sold at the end of year 5. What resale value will result in a 12% after-tax rate of rate for the company? Assume a tax rate of 34%.
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