cost. The plan is to generate $21,000 of incremental revenue per additional auto in each year of operation. The controller estimates that other costs will amount to 20 cents per kilometre on an average of 40,000 kilometres per car per year She also estimates that the new business will require an investment of $10,000 in additional working capital. The firm is in a 30 percent tax bracket and uses 12 percent as a cost of capital a. Calculate the NPV (Do not round the intermediate calculations. Round the final answer to the nearest whole dollar. Negative answer should be indicated by a minus sign. Omit 5 sign in your response.) Should Elite purchase the automobiles? a. a)NPV $82,286 + 0.1% and b) NO b. a)NPV-$72,386 * 0.1% and b)NO c. a)NPV-$92,386 0.1% and b) NO da)NPV-$82,286 0.1% and b)NO e. a)NPV-$72,386 a 0.1% and b) Yes f. a)NPV $92,386 0.1% and b) Yes 20 a)NPV = -S82 286 +0.1% and bles
cost. The plan is to generate $21,000 of incremental revenue per additional auto in each year of operation. The controller estimates that other costs will amount to 20 cents per kilometre on an average of 40,000 kilometres per car per year She also estimates that the new business will require an investment of $10,000 in additional working capital. The firm is in a 30 percent tax bracket and uses 12 percent as a cost of capital a. Calculate the NPV (Do not round the intermediate calculations. Round the final answer to the nearest whole dollar. Negative answer should be indicated by a minus sign. Omit 5 sign in your response.) Should Elite purchase the automobiles? a. a)NPV $82,286 + 0.1% and b) NO b. a)NPV-$72,386 * 0.1% and b)NO c. a)NPV-$92,386 0.1% and b) NO da)NPV-$82,286 0.1% and b)NO e. a)NPV-$72,386 a 0.1% and b) Yes f. a)NPV $92,386 0.1% and b) Yes 20 a)NPV = -S82 286 +0.1% and bles
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
Related questions
Concept explainers
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Question
Transcribed Image Text:The Elite Car Rental Corporation is contemplating expanding its short-term rental fleet by 30 automobiles at a cost of $900,000. It
expects to keep the autos for only two years and to sell them at the end of that period for 60 percent, on average, of what they
cost. The plan is to generate $21,000 of incremental revenue per additional auto in each year of operation. The controller
estimates that other costs will amount to 20 cents per kilometre on an average of 40,000 kilometres per car per year. She also
estimates that the new business will require an investment of $10,000 in additional working capital. The firm is in a 30 percent tax
bracket and uses 12 percent as a cost of capital
a. Calculate the NPV (Do not round the intermediate calculations. Round the final answer to the nearest whole dollar.
Negative answer should be indicated by a minus sign. Omit $ sign in your response.)
b. Should Elite purchase the automobiles?
O a. a)NPV = $82,286 ± 0.1% and b)NO
O b. a)NPV = -$72,386 ± 0.1% and b)NO
O c. a) NPV = $92,386 ± 0.1% and b)NO
Od. a)NPV-$82,286 0.1% and b)NO
Oe. a)NPV = $72,386 = 0.1% and b) Yes
Of. a)NPV = $92,386 = 0.1% and b) Yes
Og a) NPV = -$82,286 + 0.1% and b) Yes
Ⓒha) NPV = $82,286 * 0.1% and b) Yes
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education