You are debating on purchasing a limo for the use of the executive team. The purchase price would be $100,000 and it would be depreciated over its 5 year life. The annual operating expenses for the limo are estimated as follows: $5000/year for fuel, $45000 per year for the driver, $2000/year for maintenance. The limo would have no salvage value at the end of its 5-year life. The firm faces a tax rate of 21%. What is the NPV of purchasing the limo if the discount rate is 10%?
You are debating on purchasing a limo for the use of the executive team. The purchase price would be $100,000 and it would be
Net present value is present value of cash inflows minus present value of cash outflows. In the present case there are no inflows. Thus, net present value would only have cost component and the resultant figure would be negative.
Step by step
Solved in 2 steps with 1 images
