Evaluate the proposed acquisition

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Reference no: EM131442405

You have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck. The truck's basic price is 50,000 and it will cost another 10,000 to modify it for special use by your firm. The truck falls into a five-year depreciation straight line and will be depreciated to zero over the five year period. The truck is actually expected to be sold for 20,000 after three years when the project is ended. Use of the truck will require an increase in net working capital of 2,000. the truck will have no effect on revenue, but expected to save firm 22,000 per year in before tax op costs. The firms marginal tax rate is 40 percent and required rate of return on project is 13%. Should you accept the project, find the NPV through excel.

Reference no: EM131442405

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