Lemington Enterprises is considering a project to replace its fleet of 10 vehicles. The company makes a fleet replacement decision every five years. Its current fleet of 10 vehicles was purchased five years ago at $50,000 each and can be sold for $10,000 each today. The new vehicles will cost $60,000 each and will bring cost savings of $100,000 per year. In five years, the new vehicles can be sold for $12,000 each. If the fleet is not replaced today, the current fleet will have no salvage value in five years’ time. The CCA rate on these vehicles is 30%, and the company’s marginal tax rate is 35%. What is the PV(CCATS) for this replacement project, assuming a required rate of return of 10%? Round your answer to the nearest dollar. Select one: a. $115,626 b. $135,672 c. $130,295 d. $105,725 e. $148,711
Lemington Enterprises is considering a project to replace its fleet of 10 vehicles. The company makes a fleet replacement decision every five years. Its current fleet of 10 vehicles was purchased five years ago at $50,000 each and can be sold for $10,000 each today. The new vehicles will cost $60,000 each and will bring cost savings of $100,000 per year. In five years, the new vehicles can be sold for $12,000 each. If the fleet is not replaced today, the current fleet will have no salvage value in five years’ time. The CCA rate on these vehicles is 30%, and the company’s marginal tax rate is 35%. What is the PV(CCATS) for this replacement project, assuming a required rate of return of 10%? Round your answer to the nearest dollar. Select one: a. $115,626 b. $135,672 c. $130,295 d. $105,725 e. $148,711
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
Question
8-8 Lemington Enterprises is considering a project to replace its fleet of 10 vehicles. The company makes a fleet replacement decision every five years. Its current fleet of 10 vehicles was purchased five years ago at $50,000 each and can be sold for $10,000 each today. The new vehicles will cost $60,000 each and will bring cost savings of $100,000 per year. In five years, the new vehicles can be sold for $12,000 each. If the fleet is not replaced today, the current fleet will have no salvage value in five years’ time. The CCA rate on these vehicles is 30%, and the company’s marginal tax rate is 35%. What is the PV(CCATS) for this replacement project, assuming a required
Select one:
a. $115,626
b. $135,672
c. $130,295
d. $105,725
e. $148,711
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 2 steps with 5 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