Compare before-tax equivalent annual costs

Assignment Help Engineering Mathematics

Reference no: EM131507383

Question: Work Problem by comparing after-tax equivalent PWs if the effective income tax rate is 40%, the present book value is $5,000, and the depreciation charge is $1,000 per year if the firm continues to own the truck. Any gains or losses on disposal of the old truck affect taxes at the full 40% rate, and the after-tax MARR is 5%.

Problem: A four-year-old truck has a present net realizable value of $6,000 and is now expected to have a market value of $1,800 after its remaining three-year life. Its operating disbursements are expected to be $720 per year. An equivalent truck can be leased for $0.40 per mile plus $30 a day for each day the truck is kept. The expected annual utilization is 3,000 miles and 30 days. If the before-tax MARR is 15%, find which alternative is better by comparing before-tax equivalent annual costs

a. using only the preceding information;

b. using further information that the annual cost of having to operate without a truck is $2,000.

Reference no: EM131507383

Questions Cloud

Professional legal representation for both unions - employee : Given the complexity of modern arbitration proceedings, do you think that professional legal representation for both unions and employers should be required?

Calculate the duration gap at the time of purchase : Calculate the duration gap at the time of purchase. Does this bond at purchase entail the risk of higher or lower interest rates?

Explain the various degrees of dependency : A firm is considering a capital investment. The risk premium is 0.04, and it is considered to be constant through time.

How are faults hypocenters and epicenters related : How are faults, hypocenters, and epicenters related? Faults that are experiencing no active creep may be considered "safe"

Compare before-tax equivalent annual costs : Work Problem by comparing after-tax equivalent PWs if the effective income tax rate is 40%, the present book value is $5,000, and the depreciation charge is $1.

If the firm repurchases shares : If the firm repurchases shares, how many shares will be repurchased, and what will your total wealth be?

Analyze the cost justification strategies : Analyze the cost justification strategies that you will use to justify the cost of the HRIS, including data that identify each benefit.

Globalization of culture shaped places : How has globalization of culture shaped places or landscapes?

Standard money demand function : A standard 'money demand' function used by macroeconomists has the form ln(m) =ß0+ß1 ln(GDP) +ß2R.

User Account

All Pages