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Determine whether gop should purchase new business vehicle

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Reference no: EM133050963

Question - Gop INC. is interested in purchasing a new business vehicle. The vehicle costs $40,000 and will generate constant-dollar delivery revenue of $15,000 (year 0 dollars) for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $3,000. The tax rate is 21%, and annual inflation is 5%. Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Gop INC. uses an after-tax real interest MARR of 7%, compute the PW, and determine whether Gop INC. should purchase the new business vehicle.

Reference no: EM133050963

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