Fink Co. is interested in purchasing a new business vehicle. The vehicle costs $50,000 and will generate constant-dollar delivery revenue of $25,000 (year 0 dollars) for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $4,000. The tax rate is 21%, and annual inflation is 5%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Fink Co. uses an after-tax real interest MARR of 7%, compute the PW, and determine whether Fink Co. should purchase the new business vehicle.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Fink Co. is interested in purchasing a new business vehicle. The vehicle costs $50,000 and will generate constant-dollar delivery revenue of $25,000 (year 0 dollars) for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $4,000. The tax rate is 21%, and annual inflation is 5%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Fink Co. uses an after-tax real interest MARR of 7%, compute the PW, and determine whether Fink Co. should purchase the new business vehicle.

 

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