What annual mileage must a salesman travel by car

Reference no: EM131958066

Question: A company is currently paying a sales representative $0.25 per mile to drive her car for company business. The company is considering supplying the representative with a car, which would involve the following: a car costs $12,000, has a service life of 5 years, and a market value of $3, 500 at the end of that time. Monthly storage costs for the car are $80, and the cost of fuel, tires, and maintenance is 15 cents per mile. The car will be depreciated by MACRS, using a recovery period of 5 years (20%, 32%, 19.20%, 11.52%, and 11.52%). The firm's marginal tax rate is 40%. What annual mileage must a salesman travel by car for the cost of the two methods providing transportation be equal if the interest rate is 15%?

Reference no: EM131958066

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