Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor with Amazon Logistics. The vehiclewould cost $187,500 and generate delivery revenue of $50,000 for each of the next 6 years. If Robinson Co. purchases the vehicle, itwill take a loan for $150,000. The terms of the loan stipulate that 2% annual interest would be charged and that the loan would berepaid in 6 equal end of year payments. At the end of the 6 years, the vehicle will have a salvage value of $5,000. The tax rate is 40%.Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Robinson Co. uses an after-tax MARR of 10%,compute the PW and determine whether Robinson Co. should purchase the new business vehicle.Click here to access the TVM Factor Table calculator.Click here to access the MACRS-GDS Property Classes.Click here to access the MACRS-GDS percentages page.Click here to access the MACRS-GDS percentages for 27.5-year residential rental property.$Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±10.Should Robinson Co. purchase the new delivery vehicle?

.Part 2: Explanation:Step 1: Calculate the Annual Cash Flows:First, let's calculate the annual cash…

Answered: Robinson Co. is interested in…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 28P

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