What is its after tax present worth

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Reference no: EM131562055

In New York City taxi cab licenses (called medallions) are quite valuable. A taxi can make $75,000 per year in revenue. The cost to purchase a taxi is $25,000 and it must be sold in 3 years when it has a salvage of $10,000. Additionally, the taxi incurs $20,000 in O&M costs every year. The owner of the medallion must pay 10% in state taxes and 33.333% in federal taxes. They can depreciate the taxi using the straight line method. These medallions will last forever.

Assuming that the 3 year cycle of costs and revenue will continue for the foreseeable future and that the MARR is 5% per year, what is the value of this medallion (i.e., what is its after tax present worth)?

Reference no: EM131562055

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