Determine whether Contig INC should purchase vehicle

Assignment Help Financial Accounting
Reference no: EM133068534

Question - Contig INC. is interested in purchasing a new delivery vehicle so it can become a subcontractor with Go INC.. The vehicle costs $85,000 and will generate delivery revenue of $33,000 in year 1; they anticipate this revenue will increase by 5% in each of the following five years (years 2-6) due to inflation. If Contig INC. purchases the vehicle, it will take a loan for $60,000 that charges 4% annual interest and repay the loan in 6 equal end of year payments. At the end of the 6 years, the vehicle will be sold for $13,000 (in then-current dollars). The tax rate is 25%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Contig INC. uses an after-tax MARR of 8%, compute the PW and determine whether Contig INC. should purchase the new business vehicle.

Reference no: EM133068534

Questions Cloud

Support the education of favorite grand-nephew : Alysha would like to support the education of her favorite grand-nephew, Stephen, who plans to begin university in 3 years.
What amount should be reported for prepaid insurance : What amount should be reported for prepaid insurance in REAL's financial statements for the three months ended March 31, 2019
Determine quarterly payment : Alysha would like to borrow $ 30,000 to pay one year's tuition at a private U.S. university. She would like to make quarterly payments and finish repaying the l
What are the before-tax cost and after tax cost : The dividend of CLTE Ltd is expected to grow at 25%. What are the before-tax cost and after tax cost of retained earnings for CLTE Ltd respectively
Determine whether Contig INC should purchase vehicle : Contig INC. uses an after-tax MARR of 8%, compute the PW and determine whether Contig INC. should purchase the new business vehicle
What is the breakeven age for the brs plan : Your friend's father just turned 55 and is thinking of joining CPF LIFE. He tells you that if he sets aside the Basic Retirement Sum (BRS) of $90,500 today, he
Recalculate the current price : Sophia Perez' research indicates that if a proposed expansion is undertaken, the annual rate of dividend growth will rise. She feels that in the best case, the
Determining the interest rates and bond prices : Bonds and interest rates have an inverse connection. Bond prices normally fall when the cost of borrowing money rises (interest rates rise).
Explain the value-added proposition : What will be your value-added proposition to your current/future employer? What are you discovering?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd