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A local delivery company has purchased adelivery truck for $15,000. The truck will be depreciated under MACRS as five-year property. Thetruck’s market value (salvage value) is expectedto decrease by $2,500 per year. It is expected thatthe purchase of the truck will increase its revenueby $10,000 annually. The O&M costs are expectedto be $3,000 per year. The firm is in the 40% taxbracket, and its MARR is 15%. If the company plansto keep the truck for only two years, what would bethe equivalent present worth?

A local delivery company has purchased adelivery truck for $15,000. The truck will be depreciated under MACRS as five-year property. Thetruck’s market value (salvage value) is expectedto decrease by $2,500 per year. It is expected thatthe purchase of the truck will increase its revenueby $10,000 annually. The O&M costs are expectedto be $3,000 per year. The firm is in the 40% taxbracket, and its MARR is 15%. If the company plansto keep the truck for only two years, what would bethe equivalent present worth?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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A local delivery company has purchased a
delivery truck for $15,000. The truck will be depreciated under MACRS as five-year property. The
truck’s market value (salvage value) is expected
to decrease by $2,500 per year. It is expected that
the purchase of the truck will increase its revenue
by $10,000 annually. The O&M costs are expected
to be $3,000 per year. The firm is in the 40% tax
bracket, and its MARR is 15%. If the company plans
to keep the truck for only two years, what would be
the equivalent present worth?

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