The firm is contemplating the following (base case): Vehicle acquisition cost $ 48,000 Years of useful life (economic life) 1 Tax rate 25% Required rate of return on equity 11% Required return on debt 6% Debt ratio 40% Annual revenues $ 175,000 Operating expenses (excluding depreciation) $ 115,000
The firm is contemplating the following (base case):
Vehicle acquisition cost $ 48,000
Years of useful life (economic life) 1
Tax rate 25%
Required rate of
Required return on debt 6%
Debt ratio 40%
Annual revenues $ 175,000
Operating expenses (excluding
1.Depreciate straight-line over the year of useful life, down to $0 over one year.
- The maximum dividend is paid at year end.
- Ignore any working capital effects.
- Capital charge will be based on the assets at the beginning of each year.
What's the OCF analysis?
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