Equipping all 2000 with the satellite hookup will require

Reference no: EM13396307

Burlington Motor Carriers, a trucking company, is considering installing a two-way mobile satellite messaging service on its 2,000 trucks. On the basis of tests done last year on 120 trucks, the company found that satellite messaging could cut 60% from its $5 million bill for long-distance communication with truck drivers. More importantly, the drivers reduced the number of “deadhead” miles those driven with non paying loads by 0.5%. Applying that improvement to all 230 million miles coverd by the Burlington fleet each year would produce an extra $1.25 million savings.

Equipping all 2,000 with the satellite hookup will require an investment of $8 million and the construction of a message-relaying system costing $2million. The equipment and onboard devices will have a service life of eight years and negligible salvage value; they will be depreciated under the five-year MACRS class. Burlington’s marginal tax rate is about 38%, and its required minimum attractive rate of return is 18%

(a) Determine the annual net cash flows from the project.
(b) Perform sensitivity analysis on the project’s data, varying savings in telephone bills and savings in deadhead miles. Assume that each of these variable can deviate from its base-case expected value +-10%, +-20% and +-30%
(c) Prepare sensitivity diagrams and interpret the results.

Reference no: EM13396307

Questions Cloud

What is the breakeven point what decisions does the : what is the breakeven point? what decisions does the breakeven point help an organization to make? what financial

Write a paper of no more than 700 words discussing the four : write a paper of no more than 700 words discussing the four different types of financial statements. explain the

Select a home country other than the united states and : perform a product launch as a team of marketing management for a sample plan. you will complete parts of the assignment

Consider the internal and external pressures contributing : use a problem-solving model to solve classic airlinersquos marketing problem located on the student website. it is not

Equipping all 2000 with the satellite hookup will require : burlington motor carriers a trucking company is considering installing a two-way mobile satellite messaging service on

What are the key innovations and technologies available to : develop channel and pricing strategies for your product launch and include both your domestic and international

A very small countryrsquos gross domestic product is 12m a : a very small countryrsquos gross domestic product is 12m. a. if government expenditures amount to 7.5m and gross

Compare and contrast the marketing communication strategies : develop a communications plan for your product launch including both your domestic and international markets.write a

What tax sources would you use to research the problem how : suppose a client has come to you with a question about corporate taxation. discuss your plan of acrion and

User Account

All Pages