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cash flows and the net present worth of the investment for this project if the firm's MARR is known to be 15%.

cash flows and the net present worth of the investment for this project if the firm's MARR is known to be 15%.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 5.3, price is $120,000, and an additional $30,000 is required to modify the equipment for special use by the company. The truck falls into the MACRS seven-year classification (the tax life), and it will be sold after five years (the project life) for $55,000. The purchase of the truck will have no effect on revenues, but it is expected to save the firm $65,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 20%. Assume that the initial investment is to be financed by a bank loan at an interest rate of 10% payable annually. Determine the after-tax cash flows and the net present worth of the investment for this project if the firm's MARR is known to be 15%. A company considerings acquiring a new heavy-duty truck. The purchase A) $118,059 B) $133,600 C) $90,022 D) Answers A, B and C are not correct
Transcribed Image Text:Question 5.3, price is $120,000, and an additional $30,000 is required to modify the equipment for special use by the company. The truck falls into the MACRS seven-year classification (the tax life), and it will be sold after five years (the project life) for $55,000. The purchase of the truck will have no effect on revenues, but it is expected to save the firm $65,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 20%. Assume that the initial investment is to be financed by a bank loan at an interest rate of 10% payable annually. Determine the after-tax cash flows and the net present worth of the investment for this project if the firm's MARR is known to be 15%. A company considerings acquiring a new heavy-duty truck. The purchase A) $118,059 B) $133,600 C) $90,022 D) Answers A, B and C are not correct
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