Laura wants to buy a delivery truck. The truck costs $117,000, and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 8% and her tax rate is 20%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms
Laura wants to buy a delivery truck. The truck costs $117,000, and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 8% and her tax rate is 20%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter27: Time Value Of Money (compound)
Section: Chapter Questions
Problem 6E
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Laura wants to buy a delivery truck. The truck costs $117,000, and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 8% and her tax rate is 20%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms?
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