NPV and profitability index of the truck purchase decision

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Reference no: EM13948582

Lowell Trucking Corporation is planning to purchase a new truck. The cost of the new truck will be $100,000. The new truck will be used for six years, but will require major repairs every two years at a cost of $25,000 each time. During its life of six years, the truck will provide cash inflow of $200,000 each year for years 1 and 2, $170,000 for years 3 and 4, and $140,000 for years 5 and 6. All costs of operating the truck, including taxes, will be $130,000 each year. After six years, the truck will be sold to a junk yard for $5,000. The company's weighted average cost of capital is 12%, and its average tax rate is 30 percent.

What is the NPV and profitability index of the truck purchase decision?

What is the IRR of the truck purchase decision?

Reference no: EM13948582

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NPV and profitability index of the truck purchase decision : Lowell Trucking Corporation is planning to purchase a new truck. The cost of the new truck will be $100,000. The new truck will be used for six years, but will require major repairs every two years at a cost of $25,000 each time. What is the NPV and ..

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