lllklkl
Post on 02-Nov-2015
212 Views
Preview:
DESCRIPTION
TRANSCRIPT
Make an investment decision about whether a $60,000 automobile should be purchased or not. Assume the automobile to be purchased will have a six-year productive life and no salvage value. It will produce income of $15,000 for the first three years before deductions for depreciation and taxes. In the last three years, the income before depreciation and taxes will be $14,000, $13,000, and $12,000, respectively. Furthermore, assume a tax rate of 35% and a cost of capital of 10% for the analysis. Hint: Use the method described in the lecture.a) What is the cash flow generated each year?b) Why is this automobile depreciated in 6 years?c) Using the present value factor table below, what is the net present value?d) should the automobile purchase be recommended based on the financial analysis?
YearPresent value factor (10%)
10.909
20.856
30.751
40.683
50.621
60.564
top related